California construction workers, builders are near deal that could mean a flood of new building

California developers and construction workers have long been fighting over wages for carpenters, plumbers, electricians and others who build homes. Now, statewide business and labor groups are working on a deal that both sides hope could lead to a flood of new building.

The negotiations, which have been going on for more than a year and now involve Gov. Gavin Newsom, are aimed at writing new state legislation that guarantees minimum pay, benefits and training for construction workers, likely in exchange for relief under state environmental law governing development.

“Instead of us being at odds like we were and going to our respective corners, now we’re on a path to not only make it easier to build but also to grow labor,” said Dan Dunmoyer, president and CEO of the California Building Industry Assn., the state’s largest developer trade group.

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Robbie Hunter, head of the State Building & Construction Trades Council of California, characterized both sides as being “very, very close” to an agreement.

Developers and labor are navigating some of the thorniest issues in state housing politics in their discussions: rules for how much construction workers get paid and the California Environmental Quality Act. CEQA is a 1970 law that is credited by environmentalists with preserving the state’s natural beauty but derided by development interests for blocking homebuilding.

A deal could threaten the long-held alliance between powerful labor and environmental advocates at the state Capitol that have successfully resisted wholesale changes to CEQA, which requires developers to disclose a project’s environmental effects and take steps to reduce or eliminate them. Environmental groups have not been part of the conversations, and some have expressed concern that the accelerated homebuilding could incentivize growth in areas that might clash with the state’s goals to reduce greenhouse emissions.

The construction workers union, a major donor to Democratic political causes in California, is widely considered the most powerful interest group on housing issues. In 2016, its opposition crushed a plan authored by former Gov. Jerry Brown to strip away some local restrictions on homebuilding. A similar effort passed the following year with the union’s support after wage guarantees were added.

Understanding the long-standing conflict between construction workers and developers begins with existing state laws that require union-level salaries for laborers. Developers must pay what’s known as a “prevailing wage” to those who work on taxpayer-subsidized low-income projects. Such wages are significantly higher than median construction worker pay, and many homebuilders resist them.

Two years ago, the construction workers union floated a bill that developers believed would have expanded prevailing wage requirements to privately built homes. The legislation prompted overwhelming opposition from business interests and the bill was weakened. But later that year, the union won a big victory when the Legislature passed a bill making general construction contractors liable for worker wage disputes with subcontractors.

Developers told Hunter they were struggling to build homes because of high fees on new projects and resistance from neighborhood groups and asked him for help.

“We said we’re interested in all that stuff,” Hunter said, “but we’re not interested if our workers aren’t getting the job.”

Under the deal being considered, builders would have the option to pay workers at a rate below prevailing wage but higher than what non-union labor often receives now. Workers also would get medical and retirement benefits and would be hired through apprenticeship programs. Such rules would only be available for single-family homebuilding or small apartments. Prevailing wages, often negotiated privately in addition to the state mandates, would still apply to the construction of condominium towers and other large projects.

For labor, the deal would provide greater access to the single-family market, which makes up about half the roughly 100,000 houses built in the state annually. Hunter estimated that the program could increase membership in the construction workers union, which now represents about 400,000 laborers, by 10%.

In return for paying construction workers more, developers would receive incentives intended to speed up construction. Details have yet to be finalized, but they are likely to involve an easier path through the CEQA process.

Although there’s considerable debate over how significant an obstacle the environmental law is to building, complying with its rules can be time-consuming, leaving projects vulnerable to litigation. Labor groups, in addition to rival businesses, neighborhood interests and others, also have threatened lawsuits under CEQA in an attempt to win concessions from developers. Getting labor on the same side as builders would eliminate one deep-pocketed potential CEQA challenger.

Hunter also floated a proposal to request the courts make a final decision in any CEQA lawsuit within nine months — the same shortened litigation timeline that lawmakers often grant professional sports teams for their new-stadium proposals.

Earlier this month at a San Jose forum on housing issues, Newsom touted the talks between labor and developers when asked how his administration would attempt to reform the environmental law. Newsom has set a goal of getting 3.5 million homes built in the state by 2025, more than quadrupling current production.

“I can’t promise that there’s a deal there,” Newsom said, “but I want you to know we’re well into those negotiations.”

Left out for now are environmental interests. Underscoring that tension, on Monday the construction workers union and a number of environmental justice and low-income housing advocates sent a letter urging the governor and state legislators to strengthen CEQA, not weaken it.

Cesar Diaz, the union’s political director, said it was important for labor to stand with environmental groups to preserve the law while negotiations with developers were continuing.

“For us, until we have an agreement” with developer groups, Diaz said, “we’re all in the same place.”

Hunter said he expected environmentalists would agree to the CEQA proposal because it would also require developers to build their homes to high ecological standards.

But David Pettit, a senior attorney with the Natural Resources Defense Council, said he was anxious to see details before endorsing any plan. Pettit also is worried about the kind of housing that may qualify. State lawmakers have been trying to encourage more apartment and condominium construction near jobs and transit stops to reduce driving and help meet the state’s ambitious climate change goals. A developer leading the negotiations with labor is James Ghielmetti, a builder of single-family home communities in the Bay Area and Sacramento.

“If there’s a deal to be cut,” Pettit said, “I’d rather see it cut for affordable housing and urban densification than building more suburbs in the foothills somewhere.”

Any agreement between labor and developers that involves changes to CEQA or other state laws would have to pass both houses of the Legislature. The construction worker and builder representatives gave no timeline for when a bill might be introduced.

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