Could union labor mandates on construction projects mean less affordable housing?

Supporters of a November ballot measure that would increase sales tax by a quarter of 1% say it could provide more than $1 billion a year for efforts to reduce homelessness in Los Angeles County — including hundreds of millions for affordable housing.

That money would follow billions already spent to get people off the streets. But with more than 75,000 unhoused people in L.A. County, according to the latest count, some residents are left wondering why the funding hasn’t done more.

One answer is high labor costs. Many affordable housing projects in the county have to use union workers to qualify for public funding. Those requirements can increase construction costs by 15%, according to a 2021 study.

“You may get four housing units instead of five housing units for the same amount of money,” said Jason Ward, co-director of the Santa Monica-based RAND Center on Housing and Homelessness.

Construction unions don’t dispute that labor requirements increase costs, but say they’re necessary to provide skilled workers, ensure fair wages, and create new jobs.

The newest measure, known as Affordable Housing, Homelessness Solutions and Prevention Now, requires that 80% of funding for affordable housing be earmarked for projects that use union labor.

If passed, the measure would leave most developers little choice — work with labor unions or miss out on hundreds of millions in funding.

How labor requirements work

Labor requirements describe the worker pay, benefits, and in some cases, qualifications needed on a project. The first labor requirement in California was enacted nearly a century ago to prevent contractors from cutting wages to give them an edge when competing for government work.

Today, the most common type of labor requirement is for workers to be paid union-level wages, as defined by the state. These wage standards are seen on almost all affordable housing projects that receive public funding.

A second type of labor requirement goes a step further by making contractors work directly with construction unions. These hire-union requirements face growing pushback from some housing advocacy groups and state legislators because of the added costs.

History of labor requirements in L.A.

Requirements for union labor have long applied to public projects in the city of L.A. like schools, but Proposition HHH in 2016 marked the first substantial requirement on affordable housing, according to the RAND Corporation. Some other cities have their own labor requirements.

Prop. HHH allowed L.A. to raise $1.2 billion for affordable and permanent supportive housing projects. Almost two years after it passed, the city added a requirement to use union labor for projects with more than $5 million in total construction costs or 65 housing units. That threshold was lowered to 40 units when voters passed the United to House L.A. ballot measure in 2022.

Most recently, L.A. Mayor Karen Bass expressed her support for adding labor requirements to Executive Directive 1, her flagship policy of streamlining permit approvals for affordable housing. Bass issued the order during her first week in office and is now pushing for the City Council to approve a permanent version.

In a July 1 memo to the council, Bass said “we can’t forget about those who are building these projects and I am prepared to support labor standards and protections.”

Lessons learned from Prop. HHH

The measure on the November ballot, like past initiatives, requires contractors on all projects with more than 40 housing units to work with union labor.

Miguel Santana, president of the California Community Foundation — one of the measure’s primary backers, said the newest measure incorporates lessons learned from past initiatives in L.A., like Prop. HHH, by being upfront about its labor requirements.

He also said the measure offers developers other ways to cut costs, like prioritizing funding in pro-housing cities.

Because of these cost saving strategies, Santana said, “our expectation is that the housing, the cost per unit, will be significantly less than what it currently is under [Prop.] HHH.”

Some projects ruled out

Requirements for union labor can lead to fewer affordable units and less projects overall, some researchers say.

“When you start considering policies that might increase costs by, you know, 10 to 15%, you're essentially ruling out projects,” said Ward, author of the 2021 study on affordable housing in L.A.

In the study, he found that requirements for union labor increased construction costs by $43,000 per unit. He also discovered that some developers scaled down their projects to avoid using union labor. Ward estimated that around 800 fewer units would be built as a result.

Ward said he thinks the higher cost may be worth it in some cases, but the tradeoffs should be made clearer to voters.

“It's not really a robust legislative process that leads to these [ballot measures],” said Ward. “And most voters don’t read a 40-page document before they vote on it.”

An employment crisis

Construction labor unions argue that labor requirements, like the one in the November ballot measure, help provide decent jobs for Angelenos struggling to get by.

“We don't just have a price-of-housing crisis, we have an employment crisis,” said Anne-Marie Otey, communications director for the Los Angeles/Orange Counties Building and Construction Trades Council. “And we would love to parlay some of these public dollars into good jobs for people.”

Many of the new construction jobs would be based in L.A. County because the measure prioritizes residents in the area for apprenticeships and work.

One local union construction worker, Monse Roldan, said the union’s higher wages, on-the-job training, and immediate access to benefits like health care were life changing.

“It makes everything feel a lot more possible than before working in a union,” Roldan said.

Labor unions also argue that the benefits of hiring their workers outweigh the costs.

“I would rather live in a union-built building, even if I had to pay a little more, because if there’s an earthquake, if there’s a fire, I know that we are more likely to survive it,” Roldan said. “They don’t just pay more, they expect so much more. And unions deliver.”

Susan Shelley, a spokesperson for the Howard Jarvis Taxpayers Association, stressed to LAist in May that the measure would once again ask taxpayers to contribute more money to address the ongoing homelessness crisis.

“To hit people who are just struggling to pay their own bills — to try and pay for this giant new bureaucracy to address homelessness, which is just an extension of what already has not worked — is an extremely bad idea,” Shelley said.

The proposed L.A. County measure follows another recent ballot initiative aimed at addressing homelessness and mental health. In March, California voters narrowly passed Proposition 1, which approved a nearly $6.4 billion bond for treatment beds and supportive housing.

Editor’s note: LAist gets funding from the California Community Foundation. LAist funders have no influence on the assigning, reporting or editing of our stories.