For Affordable Housing, Ditch Prevailing Wage Laws

By Ivan Osorio of CEI.

"For residents of some of the nation’s major cities, it’s hardly news that housing costs are high, with little likelihood of their coming down any time soon.

However, in two of the country’s largest states, construction unions are highlighting a possible solution, albeit unintentionally, by their opposition to affordable housing – if the projects don’t pay union wages. As The Wall Street Journal reports:

In California last week, legislators and interest groups declared dead a measure pushed by Gov. Jerry Brown to allow certain apartments with some low-income units to sidestep the state’s environmental review process. That followed a failed effort by state lawmakers in New York earlier this year to renew a widely used tax break for rental housing in New York City; now lawmakers there are straining to reach an accord to revive it.

For both measures, construction unions were key to the defeat, as they won over key allies with their argument that the government shouldn’t be aiding apartment development without also guaranteeing union-level wages. Unions, particularly in New York, have been facing a gradual erosion of their market share on residential developments, and now developers that a generation ago would have been union shops are able to fill jobs with nonunion workers, which can lower construction costs by an estimated 20%, according to New York-based Citizens Housing and Planning Council, a low-income housing group.

Of course, New York City’s and San Francisco’s high real estate prices are due in large part to those cities’ vibrant economies, but state and local governments guaranteeing union wages only makes the provision of affordable housing more difficult.

Prevailing wage laws are also anti-competitive, as they give a leg up to union contractors by barring their nonunion competitors from bidding below a de fact cost floor. Thus, other states should follow the example of West Virginia, which repealed its prevailing wage law last February.

And it’s not just at the state level. The federal prevailing wage law, the Davis-Bacon Act, routinely increases costs on federally funded construction projects. Its repeal is long overdue."