Rising construction costs arethe biggest challenge for all developers, but for affordabledevelopers, it can be a crippling one. In fact, the increasedconstruction costs are one of an amalgam of reasons that theaffordable housing supply is shrinking. However, there aresolutions. Partnering with an established affordable builder is oneof the essential ways that developers get costs under control,along with pre-construction planning to stay on schedule and workout potential cost-increasing issues before they happen.

"Affordable housing projects face several inherent challenges tocompletion, especially in California,"Richard Lara, president and CEOof RAAM Construction, tells GlobeSt.com. "Amongthese challenges are rising construction costs and scarcity ofquality labor, which, while they don't exclusively affectaffordable development, these challenges do hit the affordablesector especially hard."

Costs are the biggest concern for affordable developers becausethey can't recouped through increased rents, according to Lara."These developers are accountable to their investors, who expect acertain return on their investment," he adds. "At the same time,with the ongoing labor shortage in California, workers can affordto be choosier about the projects they work on and are more likelyto choose projects that pay better. Given the cost headwinds I justmentioned, budget-conscious affordable projects may not be on thetop of that list."