MIAMI BEACH, FLA. - Harding Village finally opened last December, a year behind schedule and more than $1 million over budget.

Affordable housing developers across the country struggled to pay for the rising cost of construction in 2006. But Carrfour Supportive Housing, an affordable housing developer based in Miami, also had to overcome unexpected opposition to its project that sprang up after work on it had started, forcing the developers to put down their hammers and hire a lawyer.

To pay for the delays, Carrfour had to raise a lot of extra money.

In late 2003, workers began to turn an old hotel on the northern, less flashy end of Miami Beach into 92 single-room occupancy apartments, including 74 housing units for people who were recently homeless. Supportive housing gives homeless people a permanent place to live along with services ranging from substance abuse counseling to mental health services.

But over the next year, parents of children attending a nearby Catholic school began to protest the project. Bowing to the parents, city officials revoked Harding Village’s building permits, stopping work while they reconsidered the structure as an “institutional” use instead of a residential complex.

Eventually, Miami Beach decided that the work could go ahead, provided that Carrfour surrounded the buildings with a 6-foot-high concrete wall.

“While we waited, prices went sky high,” said Stephanie Berman, Carrfour’s interim president. As 2004 stretched into 2005, the condominium boom and hurricane reconstruction lured workers away to higher-paying jobs and the cost of building materials swelled (see sidebar on page 25).

The rising prices put pressure on the general contractor, a local nonprofit that had never completed a job this big. The nonprofit eventually had to leave the project in the fall of 2005. Even though it meant well, the organization simply could not pay to keep enough workers at the site.

Carrfour scrambled to find a new general contractor. Florida Housing, which helped finance Harding Village, had given projects affected by hurricanes in 2005 an extra year to finish. But even with that extra time, the new Dec. 31, 2006, deadline for Harding Village loomed closer and closer.

It cost roughly $9 million to develop Harding Village. That’s more than $1 million over the original budget, including nearly $500,000 to hire the second contractor and another $400,000 in unexpected legal fees.

Carrfour’s troubles with Harding Village are extreme, but the developer is hardly alone. A growing number of affordable housing developers are asking state officials to reserve supplemental low-income housing tax credits to help them fill the gaps in their budgets. Carrfour couldn’t ask for more tax credits, because the developer had missed the application deadline once it discovered the hole in its budget.

So like many other developers, Carrfour looked for soft financing that would only require the firm to make payments on the loan when the property is making money.

Affordable housing properties now operate on such narrow margins that they can rarely afford to take out harder loans to fill gaps in their budgets, according to Jess Lawhorn, senior vice president for Wachovia Community Development Finance. Wachovia provided the bridge financing to Harding Village, and stayed with the loan throughout its extended construction period.

The Department of Housing and Urban Development provided a $1 million soft mortgage through its Supportive Housing Program. In exchange, 48 of the apartments at Harding Village are reserved for tenants with some kind of disability, ranging from substance abuse to mental health problems.

The city of Miami’s Housing for People with AIDS program provided a $296,000 mortgage. In exchange, eight units at Harding Village are reserved for tenants with AIDS.

The Department of Veterans Affairs (VA) also provided a $188,000 mortgage. Carrfour applied for this loan three times before the VA finally relented. In exchange, 20 of the apartments at Harding Village are reserved for veterans.

Finally, Carrfour has effectively surrendered its entire $571,000 developer fee to finish this project. Most for-profit developers would have walked away from a deal like this long ago.

But Carrfour believes there are now 300 homeless people living in Miami Beach, often camped in the shadow of the island’s new, super luxury condominium high-rises, and has hopes that Harding Village will finally lure 74 of them to come inside.