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Capitol Alert

Labor got higher wages in California’s housing deal. Will affordable homes still be built?


After a decades-long battle with California’s building industry, developers who want to fast-track housing production – especially in cities that have not built enough housing to keep pace with rising demand – will be required to pay higher wages and benefits to construction workers beginning Jan. 1.

Five of 15 housing bills signed into law by Gov. Jerry Brown this year include so-called prevailing wage rules for employers and contractors to pay laborers higher wages and benefits for new construction projects.

The requirements, reached after more than a year of negotiations between powerful labor groups and state Democratic lawmakers, represent the biggest expansion of union-backed pay mandates for construction workers since the late 1990s.

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“As we saw, labor is a very powerful voice in California,” said state Sen. Scott Wiener, D-San Francisco. His Senate Bill 35, seen as key to addressing California’s housing crisis, also includes the most far-reaching prevailing wage mandates.

“We have a lot more work to do, but getting this done was a very heavy lift,” he said. “It would be very hard to move this kind of legislation forward without labor as part of the coalition.”

Wiener’s measure seeks to streamline housing construction by allowing developers to bypass the lengthy and complex environmental review and permitting process for new construction projects, seen as one of the biggest drivers of development costs. Of the land-use measures passed this year, it is the most controversial because it would require that higher wages be paid for all development projects with more than 10 units, from low-income housing to luxury condos, built under the streamlined approvals process.

It is widely acknowledged, even by union advocates, that paying construction workers a prevailing wage increases the cost of building, but state labor representatives from California’s most powerful trade union argue the benefits of employing a skilled workforce far outweigh the higher cost of construction.

“Build it once, build it right,” said Robbie Hunter, president of the State Building & Construction Trades Council of California, who argues that construction workers have to pay high housing prices too. “The first prevailing wage project was the Hoover Dam. It’s as good today as it was when it was built 90 years ago.”

Building industry representatives are skeptical that much new housing will be built given the wage requirement.

“We have a really hard time seeing how this is going to be helpful, with the cost drivers added to it,” said Nick Cammarota, senior vice president and general counsel for the California Building Industry Association, which lobbied Wiener until the end of the legislative session to strip the bill of prevailing wage requirements. “Building in California is expensive enough as it is … there’s not an unlimited budget for housing. Add prevailing wage costs, and our members could see their whole business plan gone.”

State housing officials attribute the affordability crisis to a severe under-production of homes across California. Over the past decade, California has built an average of 80,000 homes per year, while 180,000 are needed to meet current demand.

Existing law requires that prevailing wages be paid on any project involving taxpayer money or public subsidy, according to the state Department of Industrial Relations, which sets the wage rates. First passed in 1931, the requirements have been strengthened over the past two decades, but this year’s housing legislation significantly expands the role of unions, said Cesar Diaz, legislative and political director for the Trades Council.

The housing package would, for the first time, apply prevailing wage requirements to some private development projects.

“This is a significant victory for all construction workers – union and non-union,” Diaz said. “The Legislature has spoken, and the governor agrees, that if you’re looking to build faster, that investment in the community should also provide a living wage to the construction workers who are building those units. I think the support we’re seeing is an acknowledgment that prevailing wage is not an impediment to building housing, and the efficiencies brought about by a skilled and trained workforce will actually achieve savings.”

Wage rates vary by county and region, but in general, pay is supposed to be in line with an area’s cost of living.

A bricklayer in Sacramento, for example, earns $70 per hour, with increases for overtime, weekends and holidays, according to state pay rate schedules. An electrician in Sacramento earns nearly $47 per hour, and a plumber earns more than $77 per hour.

In Riverside County, an electrician earns roughly $50 an hour, while a plumber makes $76 an hour.

In San Francisco, meanwhile, a bricklayer earning prevailing wages makes more than $74 per hour. A tile setter earns $87 an hour and a marble mason earns $99 per hour. Those rates are roughly the same across the Bay Area, a region that has seen some of the steepest rent increases in the state, and where evictions have skyrocketed in recent years.

David Cincotta, a land-use attorney who represents private developers, said the cost of paying higher wages could undercut the benefits of a faster, cheaper approvals process.

“The only inhibition I see, with the streamlining being widely used, is having to pay prevailing wage,” Cincotta said. “Developers are going to have to weigh how much time is saved through the streamlining and how much the additional cost will be to paying a prevailing wage.”

Wiener acknowledged that in some cases, developers may pay more, but he and others pointed out that most affordable housing projects already require workers be paid prevailing wages based on the area because they include taxpayer funding.

That will spur development in cities that have historically skirted state housing law that requires them to set aside land for affordable housing, and put up roadblocks for developers seeking to come in and build.

“Paying prevailing wage will have less of an impact on affordable developers because any site they touch has housing subsidies so they already have to pay prevailing wage,” said Matt Schwartz, president and CEO of California Housing Partnership Corp., a low- and moderate-income housing developer. “There’s no downside – just potential upside.”

California housing measures with prevailing wage provisions

  • Senate Bill 35 by Sen. Scott Wiener, D-San Francisco
  • Assembly Bill 73 by Assemblyman David Chiu, D-San Francisco
  • Senate Bill 540 by Sen. Richard Roth, D-Riverside
  • Senate Bill 2 by Sen. Toni Atkins, D-San Diego
  • Senate Bill 3 by Sen. Jim Beall, D-San Jose
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