I've used rmd_subdir somewhat successfully before, so this is puzzling. To track down the issue, I downloaded Sean Kross's bookdown-start files. I then built the book incrementally until I isolated the error. The following zip file contains the project.
bookdown-start-master.zip

The issue is in the _bookdown.yml file. First, I created a subdirector "chapters." Next, I copied one of Sean's chapters into the subdirectory. Finally, I added rmd_subdir: ["chapters"] to the _bookdown.yml file. If I comment out the rmd_subdir statement, the book builds. But if it's exposed, the following error message appears:

Error in render_book(input, fmt, ..., clean = clean, envir = envir, output_dir = output_dir, :
All input files must be under the current working directory
Calls: ... render_book -> unlist -> lapply -> FUN -> render_book
Execution halted

Exited with status 1.

xfun::session_info()
R version 4.0.0 (2020-04-24)
Platform: x86_64-apple-darwin17.0 (64-bit)
Running under: macOS Mojave 10.14.6, RStudio 1.2.5042

Locale: en_US.UTF-8 / en_US.UTF-8 / en_US.UTF-8 / C / en_US.UTF-8 / en_US.UTF-8

Package version:
assertthat_0.2.1 backports_1.1.6 base64enc_0.1.3 bookdown_0.18.3 callr_3.4.3
cli_2.0.2 compiler_4.0.0 crayon_1.3.4 curl_4.3 desc_1.2.0
digest_0.6.25 evaluate_0.14 fansi_0.4.1 glue_1.4.0 graphics_4.0.0
grDevices_4.0.0 highr_0.8 htmltools_0.4.0 jsonlite_1.6.1 knitr_1.28
magrittr_1.5 markdown_1.1 methods_4.0.0 mime_0.9 packrat_0.5.0
pkgbuild_1.0.8 prettyunits_1.1.1 processx_3.4.2 ps_1.3.2 R6_2.4.1
Rcpp_1.0.4.6 remotes_2.1.1 rlang_0.4.6 rmarkdown_2.1 rprojroot_1.3-2
rstudioapi_0.11 stats_4.0.0 stringi_1.4.6 stringr_1.4.0 tinytex_0.22
tools_4.0.0 utils_4.0.0 withr_2.2.0 xfun_0.13 yaml_2.2.1

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