How Apartment Developers Are Counteracting Supply Chain, Labor Cost Issues

Affordable housing is suffering from the effects of the economy and high construction costs, according to developers from across the East Coast, who discussed the development landscape at the GlobeSt. SPRING MULTIFAMILY Conference in Hollywood, Florida. 

Some of the biggest challenges for developers are supply chain shortfalls and costs of labor.

With inflation off the charts, Rodrigo Paredes, senior vice president of development at Housing Trust Group in Miami, said some developers are stuck figuring out new ways to fulfill demand while also navigating supply chain delays. Some, he said, have even considered not buying lumber until costs go down. And in many areas – Florida included – Parades said developments are hiring out-of-state workers, such as electricians, which can drive up costs due to housing them.

David Timmerman, senior vice president of asset management at DMG Investments, said in one of his student housing developments, furniture from China failed to arrive on time due to supply chain issues, but furniture suppliers are trying to get ahead of the problem by buying shipping containers.

Another workaround is building off-site to save time and money on shipping costs, according to Juan Fernandez, director of real estate development at AHS Residential in Three Lakes, Florida.

“We’re assembling our bathrooms, kitchens, HVAC closet, the washer and drying closet off-site,” said Fernandez. “We’re still having to pay more, plan, do better at what we do and trying to get ahead.”

Another challenge is tax assessments. Due to COVID-19 and the effect it has on getting permits due to limited staff, scheduled developments are delayed.

The cost of land is also a problem. Although there’s a lot of cash available to buy land or property, it’s hard to find deals.

Paredes said he hopes to see less volatility in the market soon: “I’m hoping the distribution and labor problems stabilize, and insurance prices become less costly.”