A 10,000-unit housing development at Suffolk Downs is on hold indefinitely. Here’s why.

Three years after Suffolk Downs won city approvals, there was supposed to be a lot more going on by now on the nearly four dozen other buildings that will eventually rise at the 161-acre property. But housing construction at the site is on hold until developer HYM Investment Group can hash out a complicated financing deal that has been pushed out of balance by an out-of-whack economy.

The holdup is a reality plaguing housing developers across Greater Boston over the last two years. Demand in our housing-starved region is sky high. And developers such as HYM’s Tom O’Brien have all the hard-won permits they need. But for all the attention paid lately to fights over zoning and other local approvals, securing permits to build isn’t even the hard part right now. Amid high interest rates and materials costs, raising enough money is the real problem.

“The whole dynamic of housing finance has shifted,” said O’Brien. “It has become so much harder to make these projects work.”

Indeed, every major ingredient of an apartment building — from wood to steel to electrical components — costs more than it did before COVID. Overall materials costs have jumped 43 percent since the start of 2020. Interest rates for construction loans have more than tripled. The investors who typically fund housing development are demanding higher returns, too. Financing new housing in Massachusetts was a complex undertaking five years ago; now it seems impossible.

There’s no hard-and-fast tally of permitted units that are not under construction across dozens of Greater Boston communities. But officials in suburban towns talk about construction permits sitting on the shelf because developers can’t close on financing. In Boston, for example, researchers at the city’s planning and development agency last year estimated there were nearly 23,000 units stuck in the pipeline. (For comparison, from 2017 through 2021, a little more than 20,000 units were built in Boston, according to a 2022 report from the Mayor’s Office of Housing.)

One proxy measure of the backlog comes from the housing developed under the state’s 40B law, which allows developers to bypass local zoning in towns that have insufficient levels of affordable housing. Officials at the quasi-state agency MassHousing say they know of some 20,000 units on pause right now. Those mixed-income projects typically rely on revenues from market-rate apartments to finance the affordable units, making them particularly vulnerable to economic shifts.

The story is much the same all over the region. Through the first five months of the year, fewer than 5,000 units worth of building permits were issued across Greater Boston. That’s down a bit from the same time in 2023, which itself was the slowest year for new housing production in more than a decade.

In a region like Greater Boston, where homes and apartments are already in extremely short supply, that will have consequences for years to come, with supply continuing to fall even further behind demand.

“We need that pressure of new construction to bring down rents,” said Adam Guren, an economist at Boston University. “So I would find it worrisome if there’s going to be a lull in building. It’s pretty simple: If there’s a construction lag hitting us in several years and demand remains strong for the Boston area, mechanically, rents have to go up.”

O’Brien, who spent years working on the permits for Suffolk Downs, blames two key factors: the rise of interest rates and construction costs.

The price of lumber and steel — major ingredients in housing construction — shot up during the pandemic thanks to international supply chain disruptions. They’ve since stabilized, but have not come back down to prepandemic levels.

Interest rates, too, shot up as the Federal Reserve moved to tackle inflation, which has made it more expensive for developers to secure construction loans. Interest rates on construction loans are roughly 5 percentage points higher than in 2022.

For an example, O’Brien points to a residential tower HYM built as part of the redevelopment of the Government Center Garage. When HYM broke ground in 2017, it cost the company around $680,000 per unit to build. Today, he said, that figure would be more like $1 million.

What’s more, given what they can earn by simply stashing cash in a bank right now, the investors who normally finance housing development are demanding higher returns. So to draw that investment, developers have to make even more money off of their buildings. This can translate to higher rents, but rents have their limits too.

“Imagine you had a building that was before returning 6 percent” on an investment, said Guren. “With a higher construction cost you’re returning maybe 4 percent. That building used to make twice as much income as was necessary to build. Now it’s not enough.”

That is ultimately what O’Brien says is preventing more construction at Suffolk Downs. HYM is working on a deal to build a second apartment building on the Revere side of the site, but right now it would cost roughly $400,000 a unit. He figures he needs to get that down to $350,000 to secure a deal with investors. So HYM has been working to simplify the architecture of the building and cut back some amenities to make the costs balance.

“The equity is literally like an on-off switch,” O’Brien said. “Either you get to the six and a half percent return on cost, or you don’t have a project.”

But while it’s easy to flip the production switch to “off,” turning it back on takes a lot more time.

From conception to grand opening, it takes about five years for a developer to build an apartment building around here. Even permitted projects will need years before they actually house people. There are still projects underway that launched before interest rates spiked, but a lull is coming once those are finished.

“If financing markets (hopefully) ease by mid-2025, we would expect new units to be available in 2030, with the intervening years providing little new production,” development firm Cabot Cabot and Forbes put it in a recent white paper.

Andrew Chaban, chief executive of Princeton Properties, a local developer and apartment owner, explains it like this: Nearly every step of the financing process — from buying the land, to securing a construction loan, to attracting equity — has become more complicated and expensive, driving project costs up. When project costs go up, those expenses get passed on to renters.

“There’s nowhere else for those costs to go, if we want the housing to get built,” said Chaban.

Some experienced developers are still moving projects along in the suburbs, But even some major suburban developments, including a housing and life sciences complex at the Riverside MBTA stop in Newton that was first proposed in 2018, are stuck.

The nearly 600-unit Riverside project has been paused since late 2022, and the formula for moving it forward “just doesn’t work” anymore, said Howard Cohen, board chair of Beacon Communities, one of the developers.

Part of the problem, said Cohen, is that the market for lab development, which was supposed to be the focus of the first phase of the Riverside project, has cratered.

In recent years, builders have had success bundling labs and housing in one project because the lab space could help subsidize the housing. Now both sides of the deal are hard to finance. Cohen said the developers are talking with investors, but may need to accelerate housing into the first phase, which will require more city permits.

The economic forces that have thrown off Riverside, he warned, could still take several years to correct.

“Fundamentally, we’ve got an equation right now that doesn’t work,” said Cohen. “Over the long run the equation will get straightened out. But we don’t know how long that’s going to take, and in the meantime we need to keep building.”

Cohen and other developers see an urgent need to get things moving again, whether the economy stabilizes soon or not.

Some are backing an idea from MassHousing to create a “momentum fund” that could be used to plug financing gaps for mixed-income housing so they can break ground. The proposal is included in the housing bond bill currently before the Legislature, where the House proposed $250 million and the Senate offered $50 million; the precise amount could be negotiated in the coming weeks.

“We need to find a way to keep building,” said MassHousing CEO Chrystal Kornegay. “And if we don’t start now, the day when we have the housing we need coming online moves further and further away.”

Andrew Brinker can be reached at andrew.brinker@globe.com. Follow him @andrewnbrinker.