Lessen sees rising material costs squeezing residential renovation budgets in 2027
XLRE•Lessen warned that higher material costs and persistent labor shortages will pressure residential operators’ renovation budgets and net operating income in 2027. Construction input prices rose 11.2% year over year through September 2026, while advertised rents rose 0.1% through March 2026.
1. Costs and labor pressure budgets
Lessen’s 2027 renovation forecast said higher material costs and persistent labor shortages will pressure residential operators’ budgets and net operating income. Construction input prices rose 11.2% year over year through September 2026, while national advertised rents increased 0.1% through March 2026. The construction industry is estimated to need 456,000 new workers in 2027, up from 349,000 in 2026.
2. Renovation priorities
Lessen said operators should prioritize upgrades that reduce recurring maintenance costs, while premium cosmetic improvements should have clear rent premiums or renewal benefits. It also recommended early vendor commitments, standardized renovation scopes and winter scheduling to help contain costs before peak leasing demand.
