Sentry
Wall Street's recent volatility has spooked some founders and investors, but deals are still getting done — and for a lucky few, that means an exit.
Sentry, a late-stage, enterprise tech unicorn that provides application performance monitoring and error tracking, is acquiring Emerge Tools, a startup that makes developer tools for mobile apps, Business Insider has learned exclusively.
Founded in 2020, Emerge Tools has built several performance and optimization tools for mobile teams, such as app size, launch performance, visual regressions, and code health. Emerge Tools' customers include OpenAI, Spotify, DoorDash, and Duolingo.
The startup was a member of startup accelerator Y Combinator's Winter 2021 batch, and it raised a $1.7 million seed funding round in 2021 from Haystack, Matrix Partners, YC, and Liquid2 Ventures.
Josh Cohenzadeh, Emerge Tools' cofounder and CEO, told Business Insider that the startup has been profitable for the majority of its life cycle and hadn't been looking to raise a funding round or explicitly to exit.
But he and Sentry cofounder David Cramer had been following each other on X, formerly known as Twitter, for a long time, and it turned out that Cramer had circulated some of Emerge Tools's tweets and blog posts to the Sentry team.
Their relationship — and the deal — originated in DMs.
"This wasn't an overnight courtship thing, but the goal of an acquisition is that we make each other way better," Cohenzadeh said.
He explained that Emerge Tools is bringing its suite of pre-development mobile app tools to Sentry while Sentry is providing Emerge Tools with a massive distribution upgrade: the former company is used by 4 million developers and 130,000 organizations.
The goal is that by joining forces, Sentry and Emerge Tools will become a one-stop shop for enterprises looking to launch an app while also debugging their website.
"This felt like a very peanut-butter-and-jelly situation," Cohenzadeh said.
Founded in 2008, Sentry offers an open-source debugging software that monitors for and fixes code problems quickly. Its clients include Disney+, Cloudflare, GitHub, Anthropic, Vercel, and Atlassian.
The startup most recently raised a $90 million Series E funding round in 2022, led by Accel and BOND Capital, at a $3 billion valuation. In total, it has raised more than $200 million.
In 2021, Sentry acquired analytics firm Spectry; in 2022, it acquired Codecov, a startup helping software developers test their code before deploying it; and in 2023, it acquired web dev podcast Syntax.
AP Photo/Jeff Chiu
On the manicured lawns outside Building 21 on Meta's sprawling Menlo Park headquarters, live llamas meandered with languid indifference, drawing clusters of developers who momentarily abandoned technical discussions for selfies with the stoic, woolly ambassadors of Meta's family of large language models.
Inside Building 21, I shivered. The cavernous auditorium's air conditioning was cranked up high. Mood lighting bathed the space in Meta's signature blue shade, and dance music blasted from speakers, lending a nightclub ambiance to the event that clashed oddly with the earnest, tech-focused agenda.
"Rise and shine!" a Meta PR person chirped as I took a seat.
This was LlamaCon, Meta's first-ever conference for AI developers. Its timing felt oddly defensive. Earlier this year, DeepSeek, an open-source AI model from China that delivered groundbreaking performance with computational efficiency, had much of Silicon Valley, including Meta's AI division, panicked.
Around the same time, Meta announced that it would spend $65 billion in 2025 to build out AI infrastructure. Weeks after that, the company released Llama 4, the latest version of its LLM family. Mark Zuckerberg called it "the beginning of a new era for the Llama ecosystem." Almost immediately after, Meta was accused of artificially inflating Llama models' performance benchmarks, a claim that executives pushed back against.
LlamaCon, I thought, was Meta's moment to reclaim trust and clarify its AI strategy.
Pranav Dixit
Onstage, Meta's Chief Product Officer Chris Cox framed the company's open source strategy as principled rather than reactive: "We were a startup once, too," he said in the keynote. "We built this place on open source."
The subtext was clear: Meta wants developers to see Llama as their path to autonomy and flexibility in an increasingly closed AI ecosystem dominated by offerings from OpenAI, Microsoft, and Google.
AP Photo/Jeff Chiu
LlamaCon featured several announcements, including the launch of a new Llama API that Meta says will make it easy for developers to integrate its models using familiar tools and interfaces. Some tasks will be possible with just a few lines of code.
Meta also announced partnerships with companies to make AI run faster; a security program with AT&T and others to fight AI-generated scams; and $1.5 million in grants to startups and universities around the world using Llama.
Conspicuously absent, however, was what many developers had actually come hoping to see: a new reasoning model to compete with what has rapidly become table stakes in the AI industry, including in Chinese open-source alternatives like DeepSeek and Alibaba's Qwen.
In a conversation with Databricks CEO Ali Ghodsi, Zuckerberg seemed to tacitly acknowledge these shortcomings.
Pranav Dixit
"Part of the value around open source is that you can mix and match," he said. "If another model, like DeepSeek, is better, or if Qwen is better at something, then, as developers, you have the ability to take the best parts of the intelligence from different models. This is part of how I think open source basically passes in quality all the closed source [models]…[It] feels like sort of an unstoppable force."
Vineeth Sai Varikuntla, a developer working on medical AI applications, echoed this sentiment when I spoke with him after the keynote.
"It would be exciting if they were beating Qwen and DeepSeek," he said. "I think they will come out with a model soon. But right now the model that they have should be on par—" he paused, reconsidering, "Qwen is ahead, way ahead of what they are doing in general use cases and reasoning."
The online reaction to LlamaCon reflected similar disappointment across developer communities.
On Reddit's r/LocalLLaMA, the top post was titled "No new models in LlamaCon announced." Users compared Meta unfavorably to Qwen 3, which Alibaba strategically released just one day before Meta's event.
"Good lord. Llama went from competitively good Open Source to just so far behind the race that I'm beginning to think Qwen and DeepSeek can't even see it in their rear view mirror anymore," wrote one user. Others debated whether Meta had planned to release a reasoning model but pulled back after seeing Qwen's performance.
On Hacker News, a popular forum for developers and tech industry professionals, some criticized the event's focus on API services and partnerships rather than model improvements as "super shallow." And one user on Threads summed up the event simply as "kinda mid."
When I asked Meta how they measured the success of the event, they declined to comment.
"It did seem like a bit of a marketing push for Llama," Mahesh Sathiamoorthy, cofounder of Bespoke Labs, a Mountain View-based startup that creates AI tools for data curation and training LLMs, told me. "They wanted to cast a wider net and appeal to enterprises, but I think the technical community was looking for more substantial model improvements."
Still, LlamaCon won praise from Wall Street analysts tracking the company's AI strategy. "LlamaCon was one giant flex of Meta's ambitions and successes with AI," Mike Proulx of Forrester told me.
Jefferies analyst Brent Thill called Meta's announcement at the event "a big step forward" to becoming a "hyperscaler, a term referring to large cloud serve providers that offer computing resources and infrastructure to businesses.
Some developers using Llama models were equally enthusiastic about the technology's benefits. For Yevhenii Petrenko of Tavus, which creates AI-powered conversational videos, Llama's speed was crucial. "We really care about very low latency, like very fast response, and Llama helps us use other LLMs," he told me after the event.
Hanzla Ramey, CTO of WriteSea, an AI-powered career services platform that helps job seekers prepare résumés and practice interviews, highlighted Llama's cost-effectiveness: "For us, cost is huge," he told me. "We are a startup, so controlling expenses is really important. If we go with closed source, we can't process millions of jobs. No way."
Toward the end of the day, Zuckerberg joined Microsoft CEO Satya Nadella onstage for a wide-ranging chat about AI's future. One comment stood out.
Llama 4, Zuckerberg explained, had been designed around Meta's preferred infrastructure — the H100 GPU, which shaped its architecture and scale. But he acknowledged that "a lot of the open source community wants even smaller models." Developers "just need things in different shapes," he said.
AP Photo/Jeff Chiu
"To be able to basically take whatever intelligence you have from bigger models," he added, "and distill them into whatever form factor you want — to be able to run on your laptop, on your phone, on whatever the thing is…to me, this is one of the most important things," he said.
It was a candid admission. For all the pageantry, LlamaCon wasn't a coronation. It was Meta still mid-pivot, trying to convince developers — and maybe itself — that it can build not just models, but momentum.
Have a tip? Contact this reporter via email at [email protected] or Signal at +1408-905-9124. Use a personal email address and a nonwork device; here's our guide to sharing information securely.
Bennett Raglin/Getty Images
Shopify will sunset a revenue share exemption it has offered to upstart developers in its app ecosystem since 2021. App developers said the sudden change would force them to re-evaluate their budgets for 2026.
Previously, the first $1 million that app developers earned each year was exempt from Shopify's revenue share. After that initial $1 million, Shopify would take a 15% cut of developers' revenue.
But as of June 16, the $1 million threshold applies on a lifetime basis and does not reset each year. Any revenue earned before January 1, 2025, will not count toward the $1 million lifetime total. Shopify's take of developer revenue will remain at 15%.
Shopify announced the change Wednesday in an email to developers and in a post on its developer changelog.
"During the pandemic, we lowered our revshare to help small developers and introduced an exemption on the first $1M earned each year," it said in the announcement. "Our ecosystem is stronger than ever—merchants have more than 16,000 apps to choose from, and we paid out more than $1B to developers last year."
The company added that the additional revenue it will collect due to the change would go to "fund tools, infrastructure, and innovation that benefit developers at every stage." It listed a series of technical updates it has already made to improve the developer experience over the last two years.
A Shopify representative declined to comment further to Business Insider.
Andy Cloyd, cofounder and CEO of influencer marketing startup Superfiliate, told BI that the previous revenue share agreement meant that developers who were earning more than $1 million a year essentially had an extra $150,000 in their budgets. He said his company would have to adjust some of its plans for 2026.
"It'll have to be accounted for somewhere, so first things to be cut will be team travel, events, and sponsorships as it's the most discretionary of our spend," Cloyd said.
Superfiliate works primarily with Shopify merchants, but it has a new offering that allows it to work with Meta advertisers and TikTok Shop sellers as well.
"This change doesn't necessarily make us divert resources towards those ecosystems, but it definitely takes away flexibility in that 'exploratory' budget to go try different things," Cloyd said.
Developers posting on LinkedIn and X lamented the policy change, especially given that many merchants are looking to cut costs amid tariffs and ongoing economic uncertainty.
Jeremiah Prummer is the CEO of two software companies building in the Shopify ecosystem: KnoCommerce and Stamped. He told BI the change won't hurt his businesses too much, but the timing could have been better.
"Anybody who's building on the Shopify ecosystem is struggling with losing business because of tariffs — or if not losing business, actively cutting costs for our customers," Prummer said. "Ultimately, our customers are the ones that are affected by tariffs, and it's Shopify's customers too."
It's unclear whether developers will have to raise the prices of their apps and services to account for the change. However, most said they would continue to build for the Shopify platform.
"When you're in the position Shopify is in, there's a lot of leeway because they've built so much value in this ecosystem over time that they can make moves like this and you still want to be a part of it," Prummer said.
Shopify's App Store is populated with thousands of apps helping merchants with functions like marketing, order fulfillment, customer support, and more. The Canadian e-commerce giant has made itself an appealing platform for developers to build on.
Its revenue share is relatively low compared to other platforms like Apple, which charges developers 15-30% of revenue. Shopify has even invested in many leading apps in its App Store. The number of Shopify-focused apps grew enormously as e-commerce sales exploded during the pandemic.
Have a tip? Contact this reporter via email at [email protected] or Signal at @mlstone.04. Use a personal email address and a nonwork device; here's our guide to sharing information securely.
JOEL SAGET/AFP via Getty Images
In a bid to protect its crown jewels, OpenAI is now requiring government ID verification for developers who want access to its most advanced AI models.
While the move is officially about curbing misuse, a deeper concern is emerging: that OpenAI's own outputs are being harvested to train competing AI systems.
A new research paper from Copyleaks, a company that specializes in AI content detection, offers evidence of why OpenAI may be acting now. Using a system that identifies the stylistic "fingerprints" of major AI models, Copyleaks estimated that 74% of the outputs from rival Chinese model, DeepSeek-R1, were classified as OpenAI-written.
This doesn't just suggest overlap — it implies imitation.
Copyleaks's classifier was also tested on other models including Microsoft's phi-4 and Elon Musk's Grok-1. These models scored almost zero similarity to OpenAI — 99.3% and 100% "no-agreement" respectively — indicating independent training. Mistral's Mixtral model has some similarities, but DeepSeek's numbers stood out starkly.
Copyleaks research
The research underscores how even when models are prompted to write in different tones or formats, they still leave behind detectable stylistic signatures — like linguistic fingerprints. These fingerprints persist across tasks, topics, and prompts, and can now be traced back to their source with some accuracy. That has enormous implications for detecting unauthorized model use, enforcing licensing agreements, and protecting intellectual property.
OpenAI didn't respond to requests for comment. But the company discussed some reasons why it introduced the new verification process. "Unfortunately, a small minority of developers intentionally use the OpenAI APIs in violation of our usage policies," it wrote when announcing the change recently.
Earlier this year, just after DeepSeek wowed the AI community with reasoning models that were similar in performance to OpenAI's offerings, the US startup was even clearer: "We are aware of and reviewing indications that DeepSeek may have inappropriately distilled our models."
Distillation is a process where developers train new models using the outputs of other existing models. While such a technique is common in AI research, doing so without permission could violate OpenAI's terms of service.
DeepSeek's research paper about its new R1 model describes using distillation with open-source models, but it doesn't mention OpenAI. I asked DeepSeek about these allegations of mimicry earlier this year and didn't get a response.
Critics point out that OpenAI itself built its early models by scraping the web, including content from news publishers, authors, and creators — often without consent. So is it hypocritical for OpenAI to complain when others use its outputs in a similar way?
"It really comes down to consent and transparency," said Alon Yamin, CEO of Copyleaks.
Training on copyrighted human content without permission is one kind of issue. But using the outputs of proprietary AI systems to train competing models is another — it's more like reverse-engineering someone else's product, he explained.
Yamin argues that while both practices are ethically fraught, training on OpenAI outputs raises competitive risks, as it essentially transfers hard-earned innovations without the original developer's knowledge or compensation.
As AI companies race to build ever-more capable models, this debate over who owns what — and who can train on whom — is intensifying. Tools like Copyleaks' digital fingerprinting system offer a potential way to trace and verify authorship at the model level. For OpenAI and its rivals, that may be both a blessing and a warning.
Koldunova Anna / Shutterstock
When your mobile app crashes, there's often a mad scramble to track down the software bug and fix it fast.
Now there's AI for that. But the technology works a lot better with Apple's iOS platform than Google's Android, according to a study released on Thursday.
A software company called Instabug built a tool called SmartResolve that uses leading AI models to automate the process of spotting app crashes, diagnosing what's wrong, and generating usable software code fixes.
They used models from OpenAI, Anthropic, Google, and Meta against a dataset of real-world app crashes. Each fix was scored on correctness, similarity to human fixes, depth of root-cause analysis, relevance, and overall coherence.
A big takeaway: AI models consistently perform better on iOS than on Android. Instabug found on Apple's platform, crash fixes were more accurate, coherent, and well-structured across nearly every model tested.
OpenAI's models, for example, delivered significantly better results on iOS. GPT-4o scored 60% on iOS versus 49% on Android. With OpenAI's o1 model, the difference was even more dramatic: It hit 62% on iOS but dropped to 26% on Android, often failing to respond entirely in Android tests.
Other models followed a similar pattern. Anthropic's Claude Sonnet 3.5 V1 scored 58% on iOS and 56% on Android — a smaller gap, but still an iOS lead.
Even Google's own Gemini 1.5 Pro performed worse on Android (51%) than on iOS (59%). Instabug found that it also faced more hallucination issues when using its larger context window.
The discrepancy may come from Android's fragmented ecosystem. Compared to iOS, which offers a more uniform environment, Android's broader range of devices and crash types can make it harder for AI models to generalize fixes.
"The stronger performance on iOS is partially due to the structure of iOS native languages like Swift and Objective-C," Kenny Johnston, Instabug's chief product officer, said. "Their syntax is more predictable and strongly typed, which makes it easier for LLMs to generate accurate fixes."
Johnston said Android's languages — Java and Kotlin — plus crash format variability means higher complexity for fixes.
Apple and Google did not respond to Business Insider's requests for comment.
If you're frustrated by some of your favorite apps pestering you to sign up for a subscription, some new data may help you empathize with their developers more. According to revenue data from "over 75,000" mobile apps, the vast majority have a hard time making $1,000 per month.
The data is detailed in RevenueCat's 2025 State of Subscription Apps report. RevenueCat makes a mobile app subscription tool kit and gathered the report's data from apps using its platform. The report covers "more than $10 billion in revenue across more than a billion transactions," and RevenueCat's customer base ranges from indie-sized teams to large publishers. Buffer, ChatGPT, FC Barcelona, Goodnotes, and Reuters are among the San Francisco-based firm's customer base.
Additionally, the report examines apps that rely primarily on in-app subscriptions, as well as those that only generate some revenue from subscriptions. All apps examined, though, actively generate subscription revenue and "meet a minimum threshold of installs or revenue (to ensure statistically meaningful findings," according to the report.
© Getty
Joe McNally/Getty Images
President Donald Trump's first month has been a head-spinning whirlwind of seemingly contradictory policy moves and zig-zagging alliances that have disoriented adversaries and allies alike.
Take Friday's on-camera shouting match between Trump and Ukrainian President Volodymyr Zelenskyy, which appeared to derail a deal for the US to extract minerals from Ukraine and scuttle peace talks the US had been trying to arrange with Russia.
Trump has expressed interest in taking over Canada and Greenland and has floated support for Gaza to be transformed into a resortlike area devoid of Palestinians, stoking anger in the Arab world. The president, meanwhile, hit Mexico and Canada with tariffs, reversing course when the stock market teetered, only to then impose trade barriers.
While Trump's brand of seemingly stream-of-consciousness decision-making and rapid-fire flip-flopping have sent shockwaves across Washington and the world, they're more familiar to those who knew him as a New York City real estate dealmaker in the decades before his political rise.
Manhattan real estate executives and attorneys who worked with him when he was active in the business in the 1980s, 1990s, and 2000s said his chaotic style was well known — and less out of the ordinary — in an industry infamous for its backstabbing and big personalities.
An attorney who worked with Trump in the '90s said that many developers in the city reflexively entered into business negotiations with a pugilistic mindset framed by the assumption that contractors, vendors, or other counterparties were overcharging or outmaneuvering them — or attempting to.
Trump, he said, was part of a smaller subset of landlords who took that a step further by freely renegotiating deals and contracts after the fact. He was also known as mercurial and combative, the person said.
"Most high-end real estate developers, high-quality real estate developers, didn't want to do joint ventures with him because of a reputation that if you had disagreement with him, then you're in a guerilla war," the attorney said. He was granted anonymity because of his client relationship with Trump, though he did not discuss specific business dealings or work that he had done with him.
Another real estate lawyer who worked with Trump on a large retail lease in Manhattan also remembered him as characteristically unpredictable.
"It's hard to know where he is going to end up and what he's going to do," the attorney said. "Some people, you can make some estimate: 'I've dealt with him a lot of times before. He is going to do this; he's going to do that.' I think Donald is harder to gauge that way."
The attorney, who also spoke on condition of anonymity to avoid speaking publicly about a president who has shown vindictive urges, said that Trump displayed his typical bravado during the deal they did.
"It was the best building in the best location and the best city and the best block," the attorney said. "It was all of it."
Some executives said they hoped that Trump had evolved from his days in real estate and business, in part because of a streak of failures, including the bankruptcies of casino resort projects he developed in New Jersey's Atlantic City in the '80s and '90s.
REUTERS/Mark Makela
"Several of his projects went bankrupt, and I'm sure he is not going to get everything right going forward either as president," said Arthur Mirante, a vice chair at the real estate services firm Savills. "So let's hope that whatever mistakes he makes, they're in areas that don't do a lot of damage to us."
Earlier in his career, Mirante was the CEO of Cushman & Wakefield, which handled leasing work at 40 Wall Street, an office building in lower Manhattan owned by Trump's real estate firm, the Trump Organization.
Mirante said he remembered Trump for admirable qualities, such as a "maniacal attention to detail" and his punctuality. As a real estate executive, Trump would sometimes tour his buildings on the weekend, he said.
"He'd point out dirt in the corners, or he'd point out metal that hadn't been polished appropriately," Mirante said of such visits to 40 Wall Street. "And that's a real asset when you're an investor and a developer and a buyer."
Trump showed less focus on the homework that was sometimes necessary to evaluate the progress or strategy of a real estate investment, according to a real estate executive who co-owned property with him. The executive said Trump often wouldn't read investment updates and financial documents that were sent to him and was dim on the details until they were explained to him verbally.
"He'll call you up and go through it. He's a visual learner," the executive said. The person didn't want to be identified disclosing private discussions he had had with Trump years ago. "He wants to talk through things and explain things, and he gets it," the executive added. "Obviously, he's a very confident guy, but he's not stupid by any means."
Those tendencies have carried over to his presidency. Trump famously didn't read intelligence briefings during his first term. In Friday's argument with Zelenskyy, he sparred with the Ukrainian leader over when Russia invaded Crimea, wrongly saying that it took place in 2015 when, in fact, it was 2014.
Trump stoked widespread optimism in the commercial real estate industry when he returned to the White House with a pro-business agenda to cut interest rates, reduce regulation, and stoke the economy.
He also tapped real estate veterans to fill senior positions in his administration, including Steve Witkoff, his special envoy to the Middle East and a key official involved in negotiations with Russia, and Howard Lutnick, who was appointed commerce secretary.
But a dizzying month of tariff actions and threats, an advancing plan to extend $4.5 trillion of tax cuts for another decade, and a reordering of bedrock American alliances and policies on the world stage have raised worries for the sector.
Tariffs and tax cuts could put upward pressure on long-term interest rates, which could hurt the health of the debt-dependent real estate business. Cooling relations with long-standing American allies like Canada and Europe and the embrace of adversaries like Russia, meanwhile, could influence global security and the flow of international investments that feed domestic economic activity and real estate dealmaking.
A senior real estate executive labeled Trump's decision-making on tariffs and tax cuts "kamikaze economics." He said he worried that prices could rise for steel, aluminum, and lumber, critical materials for real estate development. He added that he was concerned Trump's tax extension would increase the nation's $36 trillion debt and drive up long-term interest rates, which serve as the benchmark for most loans in the sector. The new administration's plans to deport millions of immigrants who do not have legal status to remain in the country, meanwhile, could affect the labor pool and push up wages and construction costs.
"It's super inflationary," the executive said.
The law firm Seyfarth Shaw recently released an annual sentiment survey for the real estate industry that could be used as a gauge for its warmth toward the Trump administration.
James O'Brien, a Washington, DC, partner at the firm, said that the survey registered the most optimism from the sector in five years. Eighty-seven percent of respondents said they thought 2025 would be a buoyant year for the real estate business.
He noted, though, that the poll was taken from January 14 to January 27, a period that corresponds to before and just after Trump's swearing-in on January 21 for his second term.
O'Brien said the turbulence of the past month may have shifted feelings negatively. The survey found that the real estate industry's greatest concerns were, in order of priority, interest rates and the cost of capital, construction costs, and inflation.
"If you look at those things, and then you look at some of the policies that the administration is rolling out and talking about, a lot of the policies are going to negatively impact these areas of greatest concern," O'Brien said. "So that would be a drag on optimism."
Apple on Thursday announced a range of new initiatives designed to help parents and developers create a safer experience for kids and teens using Apple devices. In addition to easier setup of child accounts, parents will now be able to share information about their kids’ ages, which can then be accessed by app developers to […]
© 2024 TechCrunch. All rights reserved. For personal use only.
Apple Fellow Phil Schiller, the executive in charge of leading the App Store, testified in court on Monday that he had originally raised concerns about the 27% commission the iPhone maker planned to charge app developers on any purchases made outside the App Store. In addition to being a potential compliance risk, he suggested that […]
© 2024 TechCrunch. All rights reserved. For personal use only.
Brandon Bell/Getty Images
The US is facing a looming apartment crunch, and President Donald Trump's newly unveiled 25% steel and aluminum tariffs will likely inflate already elevated construction costs and raise rents.
Mid- and high-rise apartment and condo construction require more steel in their framing and foundation and will likely be more impacted by the tariffs than single-family homes and other low-density construction, which tend to be wood-framed, said Omar Rihani, executive vice president at Project Management Advisors, a real-estate development consulting firm.
"As you go up above five stories, and then you transition from wood construction to concrete construction, now you're going to have a lot more steel per square foot," he said.
Apartment construction boomed a couple of years ago amid surging demand and low interest rates. Landlords handed out free parking, signing deals, and other perks. But that's coming to an end. Multifamily construction starts already dropped to their lowest level in more than a decade last year.
Stubbornly high interest rates, a glut of higher-end apartments in many markets, and higher labor and other building costs have made building new units far less attractive to developers — and restrictive trade policies on building materials could worsen the trend. This means rents have nowhere to go but up.
It's unclear exactly how much the tariffs, set to go into effect on all countries on March 12, will increase the price of steel in the US. Rihani predicts costs could increase in the low single digits for high-rise construction. Developers will ultimately pass higher costs on to renters and condo buyers to the extent they can, Rihani said.
In some cases, developers may choose to delay construction and wait to see if domestic steel production rises and prices stabilize. However, delaying a project is very costly, as property taxes, insurance, and interest still need to be paid. Some projects could be scrapped altogether or not pursued in the first place.
David Steinbach, global chief investment officer at the real-estate investment manager Hines, is more optimistic that strong demand for homes will keep development moving.
"While tariffs may slow some projects, we believe demand drivers are still strong enough to drive development and acquisitions," Steinbach said in a statement to Business Insider.
We've been here before. In 2018, Trump imposed 25% tariffs on steel, though he later exempted Canada and Mexico from those taxes. Despite the exemptions, the tariffs raised the commodity price of steel and increased construction costs as a result. The levies were later removed by the Biden administration. Some in the industry believe the steel prices will be tempered by the temporary increase in domestic production that occurred in the US after Trump's 2018 tariffs.
"We view steel as a medium-level risk construction material given tariffs from the President's first term had already provided significant demand for steel back to the US over the past decade," Steinbach said.
However, any increase in construction costs could hamper the effort to address the country's housing shortage and bring down costs for homebuyers and renters.
"We need to continue to build housing, and anything that holds back the creation of housing, in the long run, is not good for our nation," said Jay Lybik, director of multifamily analytics at real estate analytics firm CoStar.
Earlier this month, Trump imposed 10% tariffs on China, which are already raising construction costs, some homebuilders report.
Meanwhile, tariffs on other key construction materials are also possible. Trump has threatened to impose 25% tariffs on Canada and Mexico, which would raise the prices of widely used building materials like Canadian lumber and Mexican gypsum used for drywall. There are also the expected downstream impacts of tariffs increasing broader inflation and keeping interest rates higher for longer, which will further raise costs for homebuilders and consumers.
The homebuilding industry urged Trump to reverse course. The National Association of Homebuilders sent a letter to Trump in January requesting he exempt "critical construction materials" from his tariffs. The major industry group has since condemned the president's metal tariffs as running counter to his pledge to bring down housing costs.
"Through an executive order on his first day in office, President Trump made it a top priority to reduce housing costs and increase housing supply to ease the nation's housing affordability crisis," the NAHB said in a statement to Business Insider. "His move to impose 25% tariffs on all steel and aluminum products imports into the U.S. runs totally counter to this goal by raising home building costs."
Even if Trump ends up coming to a deal with the US's North American partners and abandoning his proposed levies, the uncertainty surrounding his policy choices could inflate building material costs by disrupting supply chains and homebuilder timelines, even as the US struggles to build its way out of a severe housing shortage.
For now, developers are doing what they can to ensure the projects they already have in motion are protected from price hikes. Some of Rihani's developer clients are stockpiling lumber.
"Our clients are moving with a bit of urgency today, trying to get ahead of the tariffs," Rihani said. "They're looking at how do they lock in their pricing, lock in their projects, so that they mitigate future risk of tariffs."
