Biofilm effects on water flow in unsaturated environments have largely been ignored in the past. However, intensive engineered systems that involve elevated organic loads such as wastewater irrigation, effluent recharge, and bioremediation processes make understanding how biofilms affect flow highly important. In the current work, we present a channel-network model that incorporates water flow, substrate transport, and biofilm dynamics to simulate the alteration of soil hydraulic properties, namely water retention and conductivity. The change in hydraulic properties due to biofilm growth is not trivial and depends highly on the spatial distribution of the biofilm development. Our results indicate that the substrate mass transfer coefficient across the water-biofilm interface dominates the spatiotemporal distribution of biofilm. High mass transfer coefficients lead to uncontrolled biofilm growth close to the substrate source, resulting in preferential clogging of the soil. Low mass transfer coefficients, on the other hand, lead to a more uniform biofilm distribution. The first scenario leads to a dramatic reduction of the hydraulic conductivity with almost no change in water retention, whereas the second scenario has a smaller effect on conductivity but a larger influence on retention. The current modeling approach identifies key factors that still need to be studied and opens the way for simulation and optimization of processes involving significant biological activity in unsaturated soils.