TRURO — Construction at the Cloverleaf project at 22 Highland Road has yet to begin, seven years after the state transferred the 3.9-acre property to the town specifically for affordable housing. The development’s total cost is now projected to be $27 million to $28 million, leaving the project with a funding shortfall of between $4 million and $7 million, according to developer Ted Malone.

In December 2022, when the project received more than $16 million from the state Dept. of Housing and Community Development, construction was expected to begin in summer 2023.

Several factors contributing to the delay, Malone said, include increased construction costs and the effect of higher interest rates on the developer’s borrowing ability.

“The impact of interest rates getting up to 6, 7, 8 percent reduces the amount that we can borrow with the same amount of cash flow that the development has,” Malone said. He is the founder and president of Community Housing Resource of Provincetown, the developer of numerous affordable housing projects on the Outer Cape, including Sally’s Way in Truro.

Construction costs first shot up because of supply-chain hitches during Covid, but there was hope that they would drop again, he said. That didn’t happen. “What we had hoped would return to normal has just been increased construction costs even though the supply is fine,” Malone said.

Costs have also risen because Truro is so remote, he added. “Funding sources don’t consider our costs to construct to be as high as in metro Boston,” though that’s not accurate, he said. Malone pointed specifically to the qualified allocation plan for the low-income housing tax credit program released by the Mass. Executive Office of Housing and Livable Communities. Finding workers and large contractors is an obstacle on the Outer Cape, he said.

According to the comprehensive permit issued by the zoning board of appeals, the Cloverleaf development’s 39 units will serve a mixed-income community, with tiered median income restrictions of 30, 60, and 100 percent. The project as approved would include 12 duplexes with a total of 24 units and a 15-unit apartment building. There would be a combination of one-, two-, and three-bedroom apartments.

But on Tuesday Malone said he had submitted a request to the ZBA for a small increase in the number of units, from 39 to 43. The development’s footprint and the total number of bedrooms wouldn’t change, said Malone. Rather, four of the planned three-bedroom units would be split into one- and two-bedroom units.

That modification would not only better meet the need on the Cape, where there is less demand for three-bedroom units, he said, but may also help with securing additional funding. “All of these units would have to be in the lower income tier to get the subsidy resources that we want,” said Malone.

The developer is asking the ZBA to consider the alteration “an insubstantial change,” which the board can decide “within the context of their original approval,” Malone said. If that request is denied, the ZBA will have to hold a public hearing on the change.

Plans for wastewater treatment and stormwater drainage will not change, according to Malone. “All of that has got to stay the way it is because that had rigorous review,” he said.

About a year ago, the project received $1.3 million in ARPA funds, Malone said. “That helped, but costs have continued to go up since then.”

Community Housing Resource is newly working with the Waltham-based contractor Delphi Construction. Malone said they are in the process of “value engineering, trying to make the construction more efficient, less expensive, finding areas where maybe we can save.” The proposed shift in the number of units is part of that process.

“Cloverleaf is a case study in why small-scale mixed-income housing development is so challenging to realize,” said state Sen. Julian Cyr. “It is incredibly disheartening that the state transferred this parcel to Truro seven years ago and not a shovel has gone into the ground.”

Malone hopes he won’t have to wait until town meeting in May to secure more funds because that would further delay construction. But it’s unclear whether there is more money available from the town’s Affordable Housing Trust, he said, and funds are scarce at the county level. There are also possible state avenues, like the Rural and Small Town Development Fund, whose grants might help with “the hard costs of infrastructure,” Malone said.

Town Manager Darrin Tangeman said he has been working since December to schedule a meeting with Cyr, state Rep. Sarah Peake, and Malone to discuss funding possibilities. The meeting is likely to take place on Jan. 29, Tangeman said Tuesday.

“To date, the town of Truro has not had to spend a significant amount of money to realize Cloverleaf, aside from legal fees related to frivolous lawsuits that were thrown out of court,” said Cyr. To realize future small or medium-size mixed-income developments, he said, “Truro may need to follow the example of Provincetown, Nantucket, and Martha’s Vineyard towns that have made direct appropriations in the budget to subsidize housing.”

The waiting list for the 16 units at Sally’s Way currently has about 200 people on it, according to Kevin Grunwald, chair of the Truro Housing Authority. That’s a “ballpark” number, he noted.

Tangeman feels the urgent need for housing in his town hall office.

“I’m seeing the challenges of recruiting town employees due to the lack of affordable or even workforce housing in Truro and in the region,” he said, mentioning the shortage of health-care workers as well. The struggle to recruit workers “is playing a role in my support” for the Cloverleaf project, he added.

Malone is hoping to see sufficient funds committed by August, with shovels in the ground by September. Construction is currently projected to take 22 months, he said.

“I’ve been such a big fan of having at-scale development at Walsh and other parcels across the region because we can maximize state and federal resources that are available,” Cyr said. “Even once we cut the ribbon on Cloverleaf, we’ll still have a major housing crisis here.”