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.

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"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."

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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."

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Pre-construction services are one of the ways that affordablebuilders can help to offset the rising construction costs."Bringing in a general contractor in the earliest stages, evenbefore any permits have been granted and the city has given itsapproval, helps developers and architects to identify constructionconcerns early and create a plan that takes into account a numberof potential roadblocks," says Lara.

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Pre-construction includes conducting an overall projectevaluation, identifying costs of planned materials, identifying anyissues, determining ways to value engineer materials. "Developerswho take advantage of pre-construction services find that they cansignificantly streamline a project's construction timeline andcomplete projects even faster, which also helps them stay withinbudget," says Lara.

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In addition, Lara says that contractors that do the workin-house can also help to offset rising costs. "One aspect of ourwork that makes RAAM unique in the general contracting world isthat we self-perform work rather than hiring out subcontractors,"he explains. "In this way, we can better control our adherence tothe timeline and make adjustments in order to meet deadlines anddeliver earlier if needed. Also, with the shortage of skilledtradesmen in the industry, hiring out subcontractors can delayprojects even further. With this method, we avoid that problemcompletely."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.