The Board of Selectmen approved nearly $700,000 toward work on the first phase to build a 72-unit affordable housing development on Millport Avenue.

David McCarthy of Jonathan Rose Companies told the board that construction costs that remained static or fell after the 2008 economic downturn have begun to climb again. He projected the additional costs of labor and materials for the first phase to be more than $500,000.

“We’re looking at 20-percent higher construction costs on a $20 million project,” McCarthy said. “It is partially a sign of a very hot construction market right now.”

When bidding the first phase to build 33 units — mostly one-bedroom units on town land — only two contractors responded, according to McCarthy.

“It isn’t like a few years ago when you a put a job out on the street and everybody and anybody would bid on it,” McCarthy said.

McCarthy said the project could trim $250,000 in winter-related construction costs if it delayed the project until the spring. The board left open the issue of whether the project should begin next month or be delayed, which could possibly impact the town’s efforts to obtain a state affordable housing moratorium.

The units added in the first phase of the project are expected to qualify the town for a four-year break from affordable housing applications under the state’s affordable housing law 8-30g, which allows developers to sidestep local zoning rules with proposals that set aside 30 percent of units rented to tenants who fall within the state’s income guidelines as low and moderate income.

“We would definitely love the moratorium but there is a yin yang in that we want to provide housing that is affordable in town,” First Selectman Rob Mallozzi said. “We want it to be a great project.”

The federal agency is requiring 18 units to be rented at rates far below those allowed by state income guidelines, housing authority officials said.

Under Department of Housing & Urban Development guidelines, the most a tenant could be charged for a single bedroom unit is $861 a month, compared with $1,085 a month under state guidelines, said Tim Welch, a member of the housing authority.

In addition, HUD’s involvement in the project as well as state labor law is expected to boost the project’s cost significantly, McCarthy said because both they will require the town to pay a higher wage to laborers based on the project being built in Fairfield County.

The regulations could add $2 million to the project budget, McCarthy said.

“In this part of the state those wages are very high and our construction manager has estimated in many cases double to the wages for those jobs outside Fairfield County,” McCarthy said.

At the meeting, the board also approved $21,450 to hire A.W. Construction to build a new bunk room for Department of Public Works’ employees to use during weather and other emergencies at a parks department facility behind Saxe Middle School.