How to Navigate Renovation Costs in the Age of Tariffs

In January, a colleague was remarking on an ongoing renovation project to transform her attic into a primary bedroom and bath. When the word "tariff" started leaking into the home renovation lexicon, she began chatting with neighbors about how she might avoid fluctuating prices, material delivery delays, and going over budget. One suggested purchasing all the major supplies now, and storing them in a shed for when permits go through and construction could begin. Imagining a Tuff Shed packed with two-by-fours, electrical conduit, insulation, bathroom tile, a toilet—it all felt somewhat dystopian.

Today, however, just one month after the Trump administration announced sweeping duties on imported goods (and shortly thereafter provided a 90-day pause on most), hoarding materials doesn’t sound like such a bad idea, especially since experts are mixed on how tariffs will impact the renovation market; USA Today sources estimate increases ranging widely—anywhere from single digits to 25 percent. But they do agree that homeowners can shield themselves from price hikes and fluctuations without postponing building their dream home, or piling up supplies in their backyards.

Though the Architecture Billings Index, the AIA’s measure of nonresidential construction, has been soft for some time, home renovations have remained a booming business. Since a light lull after a Covid-fueled surge, homeowners have been embracing change, perhaps as a way to cope with an ugly real estate market. "People are staying in their existing homes and improving them, and they’re often funding those improvements with home equity lines of credit," explains Liz Young, founder and CEO of Los Angeles start-up Realm, which guides clients through construction and renovation projects. It can make more financial sense to renovate a home than buy a new one, adds Young.

After crunching numbers on recent renovation projects in California and the greater Seattle area (where Realm operates), Young’s team has reason to believe tariffs will have little impact on total costs in those areas—around two percent in West Coast markets. "For our average customer, when we look at the percentage of the project that is an imported material, it’s actually quite low. And most of the project costs are at least half labor," she says. Perhaps contrary to the industry’s tariff anxieties, Young notes that she’s actually seeing a surge in project inquiries of late. "Given that 2026 holds more uncertainty, this actually creates a motivation to do these projects sooner than wait."

"The best thing to do is get multiple quotes, but one thing I think people often skip is asking for a sample contract."

Keefer Dunn, architect

Planning ahead can be critical to larger home renovation projects since you can secure material prices before adjusted tariff announcements and avoid resulting product delays, says Young. Many of the contractors her company works with offer "price locks," which guarantee the cost of specific materials over a period of time. While most won’t hold prices indefinitely, many will secure them for several months, she says.

Price locks are just one of several possible tools homeowners can use to secure materials costs. The AIA, which offers contracts and documents to architects and builders, also cites a "cost plus a fee" structure, known simply as cost-plus, wherein a homeowner can pay a contractor for work based on the actual cost incurred in procuring the materials or equipment, plus a fee to cover overhead, profit, and other ancillary costs.

Price locks are just one of several possible tools homeowners can use to secure materials costs. AIA Contract Documents, which offers contracts and documents to architects and builders, also cites a "cost plus a fee" structure, known simply as "cost-plus," wherein a homeowner can pay a contractor for work based on the actual cost incurred in procuring the materials or equipment, plus a fee to cover overhead, profit, and other ancillary costs. According to the company’s director of counsel and content development, Alisa Schneider, this type of compensation structure is particularly useful for projects with less-defined scopes of work, or where the costs may be uncertain.

"Often these agreements also envision that total payments to the contractor will be capped at an agreed to Guaranteed Maximum Price ("GMP")," Schneider said in an email. "The GMP gives an owner certainty as to the amount they will be obligated to pay and normally represents the contractor’s estimate for the actual cost, plus a contingency for unanticipated costs, and the contractor’s fee." The parties might also use a shared savings clause in their cost-plus agreement establishing that a contractor will be paid a percentage of any costs saved or avoided, encouraging them to control pricing for materials and labor. Commonly used, also, are contract allowances—a way for clients to provide a cost maximum for supplies that are susceptible to price changes.

When looking at project costs, Young recommends working closely with an architect or design-build group to ensure that the scope of work is clearly mapped out from the beginning. Young says that one of the biggest contributors to renovation price increases are change orders, wherein parts of a project shift and incur additional fees. She notes that a homeowner can push for a "No Change Order" clause in a contract, but if that isn’t possible or there are upheavals in the scope of work, price locks and allowances could provide some protection from material price volatility.

While legally-binding contract clauses can provide peace-of-mind to homeowners, at the root of a smooth project is finding a transparent contractor, says Chicago architect Keefer Dunn. "There are many different ways that contractors structure their contracts, especially in smaller scale renovations. The best thing to do is get multiple quotes, but one thing I think people often skip is asking for a sample contract." Sample contracts, says Dunn, help clients understand how contractors structure their payments, how they think about owner-supplied materials, and more. These contracts can demonstrate contractor professionalism, and make evident whether processes and pricing are transparent.

"Contractors will break down their costs in very different ways. It’s more standardized for large projects or new construction projects. If you’re working below $500,000, it’s the Wild West—it’s very difficult to compare apples to apples, but you can look and see who is breaking down cost of labor versus cost of materials," explains Dunn. "Are they saying the price is $40,000 and they’re breaking it out into 30 different line items? Those kinds of things help you understand where the costs are coming from."

While DYing a renovation could cut labor expenses, in many cases, collaborating with a team of professionals can actually lower material costs by leveraging their existing relationships. Young says Realm’s connections to suppliers often means significant discounts on finishes and fixtures, for example. Trusted builders can also easily calculate extra costs that could be "layered in" among tariffs. Adds Young, "When you have a supply chain that has multiple transaction points, I think it comes down to making sure that you have a trusted contractor ensuring that you’re not being ripped off, and they’re not being ripped off along the way."

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