A fight over construction worker pay has left Gov. Jerry Brown and a powerful labor group at a stalemate over the governor’s plan to speed up housing development for low-income Californians, leaving uncertainty over whether a final deal can be reached before the end of the legislative session in August.
Brown has proposed legislation to streamline approval for housing with units for low-income residents. The State Building and Construction Trades Council, which represents ironworkers, roofers, electrical workers and other construction unions, wants Brown to force home builders to pay construction workers at rates often equivalent to union wages to qualify under the plan, something the governor is resisting.
Without the higher pay rules, known as prevailing wages, Brown’s plan would push construction workers into needing low-income housing themselves, said Robbie Hunter, the head of the State Building and Construction Trades Council.
“It’s bad for the state of California. It’s bad for residents,” Hunter said. “The developers are just going to pad their profits.”
But Ben Metcalf, the governor’s director of Housing and Community Development, said the labor group’s proposal is a deal-breaker because it would raise costs for developers, making them less likely to build new homes.
“The cost-benefit analysis is such that few developers could actually afford to do that,” Metcalf said.
The prevailing wage impasse reflects deep disagreement between the governor's office and labor over the housing plan, and could threaten its approval in the Legislature.
Hunter said Brown’s proposal was the most important bill his organization has dealt with in the last three decades. He compared the loosening of housing rules offered by Brown to those that preceded the state’s energy crisis in the early 2000s and the nation’s financial crisis shortly thereafter.
“We have found the history of mass deregulation in America doesn’t work well for working people,” Hunter said.
But the changes offered by Brown apply only in a limited set of circumstances: low-income housing projects that match a local government’s zoning rules.
Brown’s plan is an effort to chip away at local restrictions that make it difficult to build housing, something many academics and researchers blame as a primary driver of California’s soaring housing costs.
Under the proposal, developers would be allowed to bypass some of those restrictions if they set aside between 5% and 20% of their projects for low-income residents depending on how close the project is to transit. To qualify, the projects would already have to comply with a city’s underlying zoning. For example, a developer couldn’t receive expedited approval to build 300 condominiums on land approved for only 100 units.
By itself, the plan would result only in a modest increase in new development — by one estimate, fewer than 2,400 new units would be constructed in San Francisco — but it would make dramatic changes in the housing approval process in that city, Los Angeles and others that now require often lengthy reviews for nearly all developments.
The strongest supporters of Brown’s plan are home builders and businesses, especially in the Bay Area where a tech-fueled job boom has spurred demand for housing. Jeremy Stoppelman, CEO of user-review website Yelp, said the state’s high housing costs have made it difficult for his company and others to attract and retain employees.
“The governor's simple solution will increase the state’s supply of housing, making it more affordable for all Californians, including those most in need of help,” Stoppelman said.
Brown’s effort, however, has not been warmly received in the Legislature. No lawmaker has emerged as a full-throated backer of the proposal, even after the governor agreed to spend $400 million on low-income housing subsidies if the Legislature passes a version of his plan.
Instead, the proposal has continued to face intense opposition chiefly from labor and environmental groups upset that the plan would limit reviews for projects under the state’s main environmental law that guides development. Brown and others have criticized labor groups for threatening litigation under that law to leverage union-friendly hiring rules.
Lawmakers are feeling the heat, said Metcalf, the Housing and Community Development director.
“They are getting a lot of political pressure from significant constituencies that don’t want this to happen,” he said.
In contrast to labor’s request for prevailing wages, Metcalf said the governor was open to some of the changes proposed by environmental groups, such as strictly limiting the program to urban areas.
Since 2001, the majority of California’s low-income housing projects that include taxpayer subsidies have required builders to pay prevailing wages, and there’s little consensus on what effect the requirement has had on home building.
In 2005, researchers at UC Berkeley found that paying prevailing wages increased costs by as much as 37%, concluding that the requirement effectively subsidizes construction workers at the expense of low-income housing consumers. Other economists have argued that the Berkeley study significantly overestimated the effects of labor on construction costs and failed to consider benefits of a better-paid workforce.
The Brown administration is trying to drum up support for the plan this month through a series of events with housing advocates and other backers across the state, starting Wednesday in San Francisco with Mayor Ed Lee.
Negotiations are expected to heat up once the Legislature returns from its summer recess in August. Despite the strong opposition from powerful groups, Assemblyman Richard Bloom (D-Santa Monica), who is part of the discussions, said he was hopeful a deal could get done.
“I support a responsible compromise,” said Bloom, who has authored narrower legislation than Brown’s. “It looks somewhat different than what’s on the table.”
Prior to the $400 million in subsidies as part of this package, Brown had been reluctant to spend more state money on low-income housing during his current tenure as governor. If nothing gets done this legislative session, Metcalf said, it’s unlikely Brown will offer a similar deal to lawmakers.
“I would worry a lot if I were them that if they pull the rug out from under this, there is not going to be an interest to do this again,” Metcalf said.
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