Rebuilding homes after a natural disaster — like the Eaton and Palisades fires earlier this year — is no small feat. And according to experts, current tariff policies and other economic factors could make that process even more difficult.
Los Angeles has some of the highest construction costs in the United States. As of 2025, basic construction in the city runs between $200 and $300 per square foot. Costs surged by 5.9% in 2024, with further increases expected this year.
Professor Christopher S. Tang, a global economics expert and distinguished professor at UCLA, says tariffs are likely to make an already challenging situation worse. Here's how.
What’s the deal with tariffs?
Tariffs are taxes placed on imported goods, making them more expensive to bring into the U.S. Companies that rely on imported materials must pay these fees. Tang said they almost always pass the cost on to consumers by raising prices.
While most people associate tariffs with products like electronics and clothing, they also apply directly to materials used in construction.
For instance, there’s currently a 14.5% tariff on Canadian softwood used in homebuilding, and there’s talk of that increasing to 34.5%. Steel and aluminum imports are already subject to tariffs as high as 50%.
The stated goal of these tariffs is to boost domestic manufacturing. But while they aren't aimed specifically at the construction industry, Professor Tang says homebuilding efforts are becoming “collateral damage.”
“President Trump wanted to create more manufacturing jobs in the U.S.,” Tang said of the tariff policy. However, he noted that the tariffs would have no positive effect on the construction industry since “construction work is already always done in the U.S.”.
Other policies could also contribute to rising construction costs. Tang points to current anti-immigration policies, which may worsen labor shortages since many construction workers are immigrants.
“Tens of thousands of people have been displaced, so we need to rebuild quickly,” he said. “But the current administration’s policies are creating a bit of a challenge.”
How tariffs are impacting rebuilding
Even before new tariffs are fully implemented, they can drive up prices. Wholesalers and importers may raise prices preemptively, anticipating the added costs.
“I think a lot of suppliers and wholesalers are withholding sales to pass on the price increase to retailers, who then pass it to consumers,” Tang explained. “So material costs are already going up.”
It’s not just raw materials. Tools and construction equipment, much of which is made overseas, are also affected.
“Don’t forget that a lot of equipment is made in China,” Tang said. “Jackhammers are made in China. Believe it or not, even a lot of nails are made in China.”
The unpredictability of tariff policy has driven other ripple effects too. In response to looming tariffs, suppliers rushed to stock up on goods, leading to a spike in shipping demand. With ocean freight lines now overloaded, shipping costs have also climbed.
And not all communities will feel the effects equally. Higher-income homeowners in areas like the Palisades typically have better access to resources and insurance coverage. Lower-income communities may not be as well-equipped to absorb the increased costs.
What this means for Los Angeles
Beyond the rising price of materials, Tang warns of broader implications for L.A.
For one, rebuilding delays could force displaced families to stay in temporary housing for longer. This drives up demand, and therefore prices, in the rental market. “Everyone is rushing to rent, so the rent went sky high,” he said.
The insurance market is also under pressure. In the wake of recent wildfires, homeowner insurance premiums are expected to rise significantly. Many insurers have dramatically reduced their wildfire coverage options, and some have pulled out of California entirely.
Longer-term, the effects could ripple across the housing market. As families eventually return to their rebuilt homes, a sudden drop in rental demand could destabilize rental prices and occupancy rates.
What we can do
When asked whether increased production costs might stabilize over time, Tang wasn’t overly optimistic. “There is no normal anymore,” he said. “The damage is already done.”
Still, he emphasized that meaningful steps can be taken. At the local, state, and federal levels, accelerating permitting processes and coordinating to offer subsidized construction loans could provide real relief for communities trying to rebuild.
More resilient construction practices also present a proactive path forward. Tang pointed to fire-resistant landscaping and building materials as effective ways to reduce risk in future climate-related disasters. Local governments could lead the charge by implementing regulations prioritizing climate-resistant materials and foliage in new developments.
Innovative housing models may also play a role. Pre-fabricated and modular homes offer a quicker, safer, and more cost-effective way to rebuild. Tang acknowledged that these options would solve a lot of issues with rebuilding, but added that they’d require doing away with misconceptions about modular design since “Americans like to build their own custom homes.”
Ultimately, much remains uncertain, especially as U.S. tariff policy continues to change wildly, but Tang left the door open for long-term change.
“There’s no simple way to deal with this right now or for the foreseeable future,” he said. “But two or three, or even four years from now, something could be different.”
In the meantime, local resilience, thoughtful policy, and community-driven solutions may be the best tools we have.
Disclaimer: The content shared in our blog is for informational purposes only and should not be considered legal, medical, or financial advice. Please consult with a qualified professional for guidance specific to your situation.
