Editorial: Affordable housing at an impasse
One of the last big fights of the legislative session is over housing construction, and the fallout could be significantly fewer new homes for low-income Californians.
Gov. Jerry Brown has proposed streamlining approvals for some urban housing developments. Under his bill, projects that meet local zoning requirements and reserve some portion of their units for low-income residents would be exempted from any additional environmental or local government review. The governor’s concern is that NIMBYism and parochial interests have blocked much-needed housing construction, and the goal of the bill is to limit the power of cities and counties to impose pointless barriers and expensive delays that drive up costs for developers and consumers.
For the record:
5:20 a.m. Nov. 30, 2022A previous version of this editorial stated that the New York City Independent Budget Office had estimated that paying prevailing wages would increase the cost of affordable housing by 13%. In fact, the office later changed its estimate to 23%.
But state labor groups representing ironworkers, roofers, electricians and other construction trades are trying to block the bill unless the governor adds a requirement: that home builders who take advantage of the faster approvals pay their construction workers at the local market’s “prevailing” rates, which typically match union wages. While the governor’s administration initially said that was a deal breaker, the director of Housing and Community Development, Ben Metcalf, later said that pay mandates, in some form, are still on the table.
Brown and his fellow Democratic lawmakers are under intense pressure from labor groups, which carry enormous sway in Sacramento. But the governor’s administration was right the first time. Brown ought to stand firm and oppose a prevailing wage requirement.
First, it’s inappropriate for the government to step into the private housing construction market and set wages. California typically requires that people hired to work on public or publicly subsidized projects be paid prevailing wages, which are set by the state based on rates established by union contracts. For the private sector, lawmakers set the minimum wage, but above that level, employers using private dollars are allowed pay whatever they can or need to pay to attract workers.
The prevailing wage requirement could [mean] California loses the potential for hundreds, even thousands, of new dwellings for low-income residents.
The projects covered by Brown’s bill fall into the latter category, where there are no public dollars involved. The only benefit for developers would be the prohibition on local governments imposing additional burdens beyond existing land-use and zoning laws. And it would apply only to certain housing projects that include low-income units. Developers and some housing advocates worry that requiring these projects to pay prevailing wages could set a precedent for all kinds of privately funded housing developments in California, which would increase the cost of housing or, worse, discourage the construction of new units.
Second, the whole point of Brown’s bill is to make it easier to build housing and, in so doing, lower its cost. Imposing wage requirements would do the opposite, although how much cost it would add is unclear. A decade ago, UC Berkeley researchers found that paying prevailing wages increased the cost of building subsidized low-income housing by as much as 37%. In New York City, where Mayor Bill de Blasio wants to build or preserve 200,000 affordable housing units, the city’s Independent Budget Office estimated that a prevailing wage requirement could increase costs by 23%.
Labor groups argue that Brown’s bill could be a win-win: higher wages for construction workers and more housing. But the proposal is offering developers a benefit — streamlined approvals — in exchange for the inclusion of low-income units. There is a very real risk that the prevailing wage requirement could cancel out the financial incentive of faster approvals, and developers may decide the voluntary program is not worth it. That means California loses the potential for hundreds, even thousands, of new dwellings for low-income residents. Also, Brown has paired the development reform bill with $400 million in grants to help build more subsidized housing for low-income Californians. If the bill fails, that money disappears.
It’s worth noting that labor groups, along with some environmental organizations, have been the most outspoken opponents of Brown’s bill. That’s because the proposal would exempt projects from additional review under the California Environmental Quality Act, a dramatic step that deserves more debate apart from the prevailing-wage issue. Brown has complained that labor uses CEQA as a bargaining chip, threatening lawsuits under the environmental law to get developers to hire union labor. But housing policy shouldn’t be a bargaining chip, not now, when California is in the midst of a housing crisis in which California’s major cities are increasingly unaffordable for most of their residents.
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