Tariffs act like a nationwide consumption tax, raising prices on imported goods and squeezing household budgets. Michael Litt’s analysis shows these costs hit lower-income households hardest, reducing discretionary spending and shortening storage stays.
Key adjustments for investors:
Target Higher-Income Trade Areas
Focus on areas in the upper third of income indices (e.g., using Low Poverty Index tools). These customers are less affected by tariff-driven inflation and can sustain longer storage tenures.
Account for Higher Churn in Mid- to Lower-Income Areas
In deciles 3–6, expect shorter average stays and higher turnover. If operating in these areas, budget for increased marketing and re-leasing costs.
Incorporate Inflation in Capex Planning
Tariffs raise materials and labor costs. When running numbers on expansions or improvements, calculate the net after-tax effect considering both OBBBA incentives and cost inflation.
Be More Surgical in Development
Tighten site selection criteria, avoid marginal trade areas, and prioritize projects that can withstand both higher borrowing costs and slower lease-ups.
By aligning trade-area targeting and capex timing with tariff realities, investors can better protect occupancy stability and returns.
