Rising Costs Hit Affordable Housing Projects

Within one week, two trusted contractors called developer Brian McGeady with troubling news about a pair of his affordable housing projects. The messages were similar: We can’t pin down our subcontractors to give us a number they’re willing to stand behind.

The phone calls showed just how volatile construction costs have become in the last several months.

“Going back a year ago or even nine months ago, many of the increases were in lumber,” says McGeady, who is a managing partner at West Chester, Ohio-based MVAH Partners. “It wasn’t all lumber, but that was the vast majority. Now, it is literally every trade and their materials.”

Rising development costs aren’t new. Developers have been grappling with those for years. What’s different is how tumultuous the market has been, with prices increasing not only sharply but quickly, according to several developers.

“It’s moving fast,” says McGeady, who received construction cost estimates for two Ohio developments in November. Two months later, he was hit with revised costs that were $750,000 and $500,000 more, respectively, on top of increases that happened earlier.

This is not a singular developer, owner, or contractor issue but a widespread problem, he says.