Rising construction costs are the biggest challenge for all developers, but for affordable developers, it can be a crippling one. In fact, the increased construction costs are one of an amalgam of reasons that the affordable housing supply is shrinking. However, there are solutions. Partnering with an established affordable builder is one of the essential ways that developers get costs under control, along with pre-construction planning to stay on schedule and work out potential cost-increasing issues before they happen.
"Affordable housing projects face several inherent challenges to completion, especially in California," Richard Lara, president and CEO of RAAM Construction, tells GlobeSt.com. "Among these challenges are rising construction costs and scarcity of quality labor, which, while they don't exclusively affect affordable development, these challenges do hit the affordable sector especially hard."
Costs are the biggest concern for affordable developers because they can't recouped through increased rents, according to Lara. "These developers are accountable to their investors, who expect a certain return on their investment," he adds. "At the same time, with the ongoing labor shortage in California, workers can afford to be choosier about the projects they work on and are more likely to choose projects that pay better. Given the cost headwinds I just mentioned, budget-conscious affordable projects may not be on the top of that list."
Pre-construction services are one of the ways that affordable builders can help to offset the rising construction costs. "Bringing in a general contractor in the earliest stages, even before any permits have been granted and the city has given its approval, helps developers and architects to identify construction concerns early and create a plan that takes into account a number of potential roadblocks," says Lara.
Pre-construction includes conducting an overall project evaluation, identifying costs of planned materials, identifying any issues, determining ways to value engineer materials. "Developers who take advantage of pre-construction services find that they can significantly streamline a project's construction timeline and complete projects even faster, which also helps them stay within budget," says Lara.
In addition, Lara says that contractors that do the work in-house can also help to offset rising costs. "One aspect of our work that makes RAAM unique in the general contracting world is that we self-perform work rather than hiring out subcontractors," he explains. "In this way, we can better control our adherence to the timeline and make adjustments in order to meet deadlines and deliver earlier if needed. Also, with the shortage of skilled tradesmen in the industry, hiring out subcontractors can delay projects even further. With this method, we avoid that problem completely."
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Kelsi Maree Borland
