Billions more for California housing? Why some construction unions aren’t sold yet

Unions demand tax dollars be spent on them or no housing project.

“Now the State Building and Construction Trades Council of California, an umbrella group that covers electricians, roofers, heavy machinery operators and other unionized construction workers, is backing a bill that would tack on some additional terms. Senate Bill 735 would require any developer who wants to use the bond money to fund a project of 40 units or more to first enter into a contract known as a project labor agreement. Such agreements typically steer developers toward hiring unionized workers and stipulate strict worker protections. 

The great news is that the whole $48 billion bond—principal plus interest—has been scrapped.  But, it will come back—and the special interest will control it.  When you have union only projects, that adds 21% to the cost.  In other words you only get $.79 on the dollar to spend—the rest is a bribe to the unions.

Billions more for California housing? Why some construction unions aren’t sold yet

by Ben Christopher, CalMatters,  8/13/24    https://calmatters.org/housing/2024/08/housing-bond-unions-affordable/?utm_medium=email&utm_source=ActiveCampaign&utm_medium=email&utm_content=How%20big%20a%20role%20for%20Newsom%20in%20Harris%20campaign%3F&utm_campaign=WhatMatters

In summary

California’s most unaffordable region is set to vote on a record-breaking affordable housing bond. Will state Democrats add a pro-union requirement to win over a powerful labor coalition?

This November, voters across the San Francisco Bay Area will be asked whether to back the largest affordable housing bond in California history — a $20 billion IOU aimed at building homes in the epicenter of the state’s housing crisis. 

But before developers, workers, pro-tenant and pro-building activists can start campaigning for the blockbuster borrowing measure in earnest, they’ll need to stop squabbling over who will get hired to build all the new homes and under what conditions. 

That fissure is mostly playing out behind closed doors, but both sides of the debate warn it could soon spill out into the open. Such a public spat could jeopardize a measure that affordable housing supporters have spent six years pushing toward the ballot and which all sides agree is likely to be the subject of a challenging campaign.

Last month, the Bay Area Housing Finance Authority voted to put a measure on the November ballot that would let the authority borrow up to $20 billion. This will only go before voters in the nine counties of the San Francisco region and it would be paid back by Bay Area property owners. 

Now the State Building and Construction Trades Council of California, an umbrella group that covers electricians, roofers, heavy machinery operators and other unionized construction workers, is backing a bill that would tack on some additional terms. Senate Bill 735 would require any developer who wants to use the bond money to fund a project of 40 units or more to first enter into a contract known as a project labor agreement. Such agreements typically steer developers toward hiring unionized workers and stipulate strict worker protections. 

With less than 100 days to go before Election Day, the time to settle this debate is now, said Sen. Dave Cortese, a Democrat who represents Campbell in the state Senate and who authored the trades-backed bill. 

“There’s a bond campaign out there that needs the support of labor across the board,” he said. 

Critics of the bill say the requirement would exclude many non-union workers from benefiting from the historic taxpayer-funded spending measure while further ratcheting up the cost of building affordable housing. In the Bay Area, such costs can already exceed $1 million per unit. A new study released this week by the RAND Institute adds fodder to those arguments: It found that a similar labor requirement on a $1.2 billion Los Angeles municipal housing bond raised total development costs by 21%.

Cortese and members of the building trades dispute such findings, but also argue that fixating on higher costs ignores the purported benefits of such labor-friendly arrangements. 

“The union building trades are the best possible path to give someone a middle class life,” said Vince Sugrue, legislative director for northern California’s sheet metal workers union. “The easiest mechanism to do that is through project labor agreements.”

Cortese’s bill currently sits before the Assembly Appropriations Committee, where it’s parked on what’s known as the “suspense file.” In one of the Legislature’s more secretive rituals, on Thursday, the committee will quickly rattle through all the bills on the suspense file, moving some along and quietly killing others, without a public vote. 

The behind-the-scene debate over this bill makes for a familiar fight in Sacramento, where the goals of building more homes, ensuring that workers who build them are well-compensated and satisfying the state’s various construction unions are often in tension. 

The cast of characters facing off against one another is a repeat too. On one side, the building trades. On the other, affordable housing non-profits and the state’s unionized carpenters. In recent years, developers, “Yes In My Backyard” activists, pro-development Democrats and the carpenters have formed a lasting and formidable political bloc to push through legislation aimed at ramping up housing production while extending labor standards that aren’t quite as stringent as those championed by the trades.

Project labor agreements have long been a hallmark of California construction projects, but tying them to every project that takes money from a voter-approved bond or tax is a relatively new idea. This coming election, voters in Los Angeles County will also be asked whether to support a sales tax hike, which promises to raise hundreds of millions of dollars for new affordable housing. That, too, has a labor agreement requirement. 

But the Bay Area bond represents the largest of its kind — the biggest housing IOU to go before voters at any time in California at either the local or state level. That makes the stakes of the debate behind Cortese’s bill especially high.

Do project labor agreements make housing more expensive?

Project labor agreements don’t come standard issue, but they do tend to have a set of common elements: high wages and benefits, clear dispute resolution rules and restrictions on how people get hired and put to work. And though a government can’t force a private company to exclusively hire union workers, these contracts can nudge them in that direction by requiring them to hire through union-run hiring halls, to take on apprentices who typically come from union programs or to pay into pension systems that only union workers collect.

Developers and other critics of these agreements say these restrictions all have the effect of discouraging non-union subcontractors from bidding on projects, which inevitably means less competition, higher winning bids and higher overall costs. 

A survey of Los Angeles developers who took part in the Measure HHH program, a 2016 Los Angeles bond measure that had a similar mandate, found that there were 20% to 50% fewer bidders on projects subject to the project labor agreement.

Opponents of the Cortese bill can also point to the RAND study of Measure HHH in 2016 as the most definitive recent empirical argument against tacking on these requirements. 

“If you eliminate the bottom-feeders that are not paying their people the proper prevailing wages, yes, it’s going to have an impact.”

Andreas Culver, Secretary-Treasurer, Building and Construction Trades Council of Alameda County

The study builds off a preliminary study from 2021. The new report released this week, which uses real cost data rather than pre-development estimates, finds that the agreement caused projects to take roughly half a year longer to wrap up and pushed costs roughly one-fifth higher.

Members of the trades tend to insist that project labor agreements do not increase costs. In the debate over Cortese’s bill, they pointed to an analysis by the UC Berkeley Labor Center, which applied RAND’s methodology to more up-to-date cost data. That analysis found that while overall cost estimates were higher for projects tied to these agreements, the result was not statistically significant — meaning that the results could have been the product of random chance. Ward countered that the Labor Center used inaccurate data posted by the city of Los Angeles. In a memo, the Labor Center’s authors acknowledged problems with the data, but said it would be premature to rescind their findings until the entire dataset can be reassessed.

Even if these agreements do hike costs, that isn’t always a bad thing, said Andreas Culver, Secretary-Treasurer of the Building and Construction Trades Council of Alameda County.

“If you eliminate the bottom-feeders that are not paying their people the proper prevailing wages, yes, it’s going to have an impact,” he said.

The unions are fighting again

Not everyone — not even every union construction worker — agrees that such agreements only exclude “bottom-feeders.”

Jay Bradshaw, Executive Officer of the Northern California Carpenters Union, said the barriers that a project labor agreement mandate would impose on hiring non-union workers is simply impractical for a state desperate for more affordable homes. He cites low unionization rates across California’s residential construction industry. “So where, magically, are these workers going to come from?” 

But his argument is also a philosophical one that has divided the carpenters from the trades council for at least two years now. The trades have regularly made union-hire requirements a condition for their support of legislation aimed at making it easier to build apartment buildings. In 2022, the carpenters joined a coalition of nonprofit developers and Yes In My Backyard activists to come up with what Bradshaw calls “not a union mandate”, but one that is broadly “pro-worker” and “inclusive” of union and non-union workers alike.

That AB 2011 standard, named for the bill by Oakland Democratic Assemblymember Buffy Wicks in which it was first introduced, forces developers to pay union-level wages, provide health benefits and agree to compliance oversight. As long as developers abide by those rules, they are free to hire whomever they like. That standard has become a go-to template for Sacramento Democratic legislators hoping to spur more housing with the blessing of developers, YIMBYs and the carpenters — though many developers still argue that it’s too costly.

That standard, said Bradshaw, would be a better requirement to tack onto the Bay Area bond. 

Selling voters on a $20 billion bond “is going to be a very heavy lift,” he said. After working on the bond measure for years, adding a “last minute” project labor agreement requirement “will make it that much harder to pass this, no doubt about it.”

Culver of Alameda County makes the opposite argument. Adding a project labor agreement requirement improves the bond’s political odds because it secures the support of the powerful trades.

“How do we go to our membership…and say ‘look, we want to support this campaign, we want to put money into this campaign, we want you to walk for this campaign, but you’re not going to be working on the jobs that these funds that are being raised are going to create?’” he said. “You need labor to win.”

Negotiations between the trades, the carpenters and Cortese’s office are ongoing, but time is running short. The bill has until Thursday to pass the Assembly appropriations committee where Wicks is chair.