If you've gotten rehab bids lately that are coming in 15–20% higher than expected on scopes involving HVAC, plumbing, or structural work, the explanation isn't your contractor. The tariff schedule that took effect in early 2026 imposed a 50% rate on goods containing steel, aluminum, and copper, and a 10% rate on softwood lumber. Every framing job, every HVAC install, every plumbing rough-in got more expensive.
Cushman & Wakefield estimates the increase in construction material costs at roughly 6% against a 2024 baseline, with total project cost increases around 3%. The National Association of Home Builders put a harder number on it: approximately $9,200 in added cost per new single-family home.
For a flipper, the math is simple and not in your favor. ARV doesn't move because your rehab cost more. Buyers won't pay $315,000 for a finished product because your copper plumbing ran 30% higher than last year's quote. The market sets the ceiling; your costs set the floor. When those two numbers get closer together, your margin is what gets squeezed. The discipline we covered in calculating your maximum allowable offer matters more in this environment than it did 18 months ago.
What's Actually Getting More Expensive
Not everything is affected equally. Cosmetic-only rehabs (paint, flooring, surface fixtures) are largely insulated. Most of those materials are domestically sourced or come from countries outside the highest-tariff brackets. If your scope is paint, LVP, and countertops, you're probably not feeling this much yet.
The projects getting hit are anything involving metal, mechanical systems, or structural work:
- HVAC. Copper refrigerant lines and aluminum components have pushed unit pricing up 12–18% on many systems.
- Copper plumbing. The single most directly affected material on a residential scope. A full rough-in that ran $8,000 last year might be $9,500 to $10,000 today.
- Structural framing. Lumber up roughly 10% adds $4,000 to $8,000 on a whole-house renovation depending on size.
- Steel-heavy appliances. Refrigerators and dishwashers have seen price increases of 5–15% depending on the manufacturer and how far ahead they locked their supply contracts.
A $75,000 cosmetic-to-moderate rehab might feel these costs modestly. A $120,000 heavy rehab with a new roof, HVAC replacement, and full plumbing rough-in is where the numbers start to feel materially different.
The Quick Read
If your scope is paint, LVP, kitchens, and baths with existing functional mechanicals, you're mostly fine. If you're touching HVAC, copper plumbing, framing, or roofing, you should be re-pricing every bid against current material costs — not last year's.
What This Does to Your Deal Math
We had a full rehab in Baltimore City this year with a renovation scope that came in at $190,000 on the original estimate. By the time the job was done, the bill was $230,000 — a $40,000 swing driven almost entirely by materials. The borrower had enough margin that the deal still worked. But what had been a great deal on paper came out the other side as a good deal. That's what a 21% cost overrun looks like on a single project.
The $40,000 difference is real money in any context, but consider what it means for the MAO calculation you ran when you bought. On a house with a $280,000 ARV, the 70% rule gives you $196,000. If the rehab was supposed to be $60,000 but ends up at $70,000, your effective MAO drops from $136,000 to $126,000. If you paid $135,000 thinking you had $11,000 in cushion, you now have $1,000. That's not a cushion. That's a rounding error.
And that's a $10,000 delta. The Baltimore City deal had a $40,000 delta.
The market sets the ceiling. Your costs set the floor. When those two numbers get closer together, your margin is what gets squeezed.
Your Contingency Buffer Needs to Go Up
If you were building in 10% on material and labor, move to 15% in the current environment. Not because your contractor is going to surprise you on labor. The material pricing they quoted three weeks ago may not hold by the time the job starts. Tariff rates have been adjusted mid-stream multiple times in 2026. A contractor who bid your job on copper at a certain price per foot may be ordering at 15% more. Some are absorbing it. Many are not.
For a deeper dive on how to scope and reserve capital so you don't run out of cash mid-project, see our guide on building a realistic rehab budget. The framework still works — you just need to dial the contingency up and price your line items at current material costs.
The Adjustments That Actually Hold
1. Lock material pricing before you put a property under contract
Not after. If you have a contractor relationship and can get a preliminary scope bid before going under contract, do it. The Baltimore deal had a fixed-price contract — but the contractor had estimated materials at pre-tariff pricing, and the final purchase orders came in substantially higher. A signed bid isn't a guaranteed ceiling unless the contract specifically holds material pricing. Make sure yours does. Our rehab scope of work template shows how to write that language in.
2. Separate labor from materials where you can
A contract where the contractor orders supplies and marks them up means you absorb the tariff effect twice: once in the cost, and again in their markup. A split contract where the contractor controls their labor rate and you purchase materials directly from a supplier keeps you in control of the number that's moving. Not every contractor will agree to this, but the ones who do are usually the ones most confident in their own labor pricing. (Our guide on vetting and hiring a rehab contractor goes deeper on how to find them.)
3. Think harder about scope selection
A full-gut with new HVAC, copper plumbing, and structural work is where the math is most compressed in 2026. A cosmetic-plus-mechanical scope on a property with existing functional systems is where the tariff effects are most contained. This doesn't mean avoid heavy rehabs. It means price them precisely, because the margin for estimation error on those scopes is narrower than it was two years ago. The same logic feeds into where you spend on finishes — in a balanced market, over-spec'd kitchens don't get paid back at exit.
Where the Tariff Effect Hits Hardest: A Side-by-Side
| Scope Item | Pre-Tariff Cost | 2026 Cost | Tariff Driver |
|---|---|---|---|
| Copper plumbing rough-in (full house) | $8,000 | $9,500–$10,000 | Copper 50% |
| HVAC system replacement | $7,500 | $8,400–$8,900 | Copper + aluminum 50% |
| Whole-house framing (1,600 sqft) | $28,000 | $31,000–$33,000 | Softwood lumber 10% |
| Roof replacement (asphalt, 2,000 sqft) | $11,000 | $11,500–$12,000 | Steel flashing, fasteners |
| Kitchen appliance package | $4,500 | $4,800–$5,200 | Steel 50% |
| Paint, LVP, surface fixtures | baseline | baseline | Largely unaffected |
These are Mid-Atlantic figures we're seeing on funded projects across our footprint. Your local supplier pricing will vary, but the directional moves are consistent everywhere we lend.
The Part That Won't Fix Itself
Supplier pricing tends to lag on the way back down even when tariff rates get adjusted. Even if the policy environment shifts later this year, the material costs you're facing for the next few quarters are largely set. The safe move is to underwrite every deal at current costs, not at what you paid on the last deal.
The market doesn't give you credit for a more expensive rehab. The adjustment that protects your margin is the one you make before you put in the offer.
Frequently Asked Questions
How much have rehab costs gone up because of 2026 tariffs?
Cushman & Wakefield estimates construction material costs are up roughly 6% against a 2024 baseline, with total project costs up around 3%. The National Association of Home Builders puts the added cost at approximately $9,200 per new single-family home. Heavy rehabs with HVAC, copper plumbing, and structural work are seeing the biggest impact; cosmetic-only scopes are largely insulated.
Which rehab line items are most affected by tariffs?
HVAC (copper refrigerant lines and aluminum components) is up 12–18% on many systems. Copper plumbing rough-ins are up roughly 20%. Structural framing with lumber is up roughly 10%, adding $4,000 to $8,000 on a whole-house renovation. Steel-heavy appliances are up 5–15%. Paint, LVP flooring, and surface finishes are largely unaffected.
How should I adjust my contingency for tariff cost risk?
Move from 10% to 15% contingency on material and labor. Tariff rates have been adjusted mid-stream multiple times in 2026, so material pricing quoted three weeks ago may not hold by the time the job starts. The bid you sign isn't a guaranteed ceiling unless the contract specifically locks material pricing.
Should I avoid heavy rehabs in the current environment?
Not necessarily. Heavy rehabs with new HVAC, copper plumbing, and structural work are where the math is most compressed in 2026, but they can still work. Price them precisely, build in a 15% contingency, and underwrite every deal at current costs rather than at what you paid on the last deal. The market doesn't give you credit for a more expensive rehab, so the adjustment that protects your margin is the one you make before you put in the offer.
Does my Pimlico bridge loan account for higher rehab costs?
Yes. Our fix & flip bridge loans are sized off ARV and total rehab cost, so a higher (correctly priced) rehab budget can support a larger loan. Our construction budget and draw process is designed to fund rehabs in stages as work is completed and verified — talk to us before you finalize your scope so we can size the loan to the real number, not last year's number.
Pricing a deal with the new cost reality?
Get a rate quote in under 60 seconds — no credit pull, no obligation. We'll size your loan to today's actual rehab cost, not last year's.