Proposed new legislation, Assembly Bill 199, authored by Assemblyman Kansen Chu (D-San Jose) and the California Building and Construction Trades Council, a labor group, would require workers to be paid the prevailing wage rate on new, privately constructed homes built with any sort of public money or government agreement. The bill requires workers to be paid prevailing wage on residential projects that have any agreement with “the state or a political subdivision,” a provision that extends the requirement beyond the redevelopment agencies, public agencies and low income housing projects covered under existing state law. If passed, the legislation would represent a state-mandated local requirement.
The bill’s author argues that, with the dissolution of redevelopment agencies, there are now other types of public agencies that may enter into disposition and development agreements to subsidize private developments. Failing to change the language of the existing law creates a gap in the coverage of the prevailing wage law. Further, this update to the Labor Code would not “make private, market-rate residential development a public work project for which prevailing wage must be paid” unless these projects are paid for in whole or part by public funds.”
A case illustrating the “gap” in coverage of the prevailing wage law is the tentative ruling relating to South Gate Senior Villas in Los Angeles County. In this example, the LA County Superior Court found that, despite the public subsidy for the project from the City of South Gage, the South Gate Senior Villas project was not a public work and therefore not subject to prevailing wage requirements, because the city was not a “state agency, redevelopment agency or local public housing authority.”
Opponents of AB 199 claim that, if the bill passes, it would increase the cost of a house by 40% or $35,000 to $60,000. The California Building Industry Association (CBIA) and the California Apartment Association have joined the Coalition for Affordable, Reliable and Equitable Housing (CARE), a newly formed group of organizations that oppose the bill.
The CBIA argues that “If enacted, this measure would have dramatic negative cost implications for newly constructed and privately financed housing in California…. Countless newspaper articles and recent reports have highlighted the dire condition of housing in California. California’s Department of Housing and Community Development estimates that we must build at least 180,000 units to keep pace with demand, not accounting for the backlog of 2 million units that has accrued over the past several decades. Homeownership rates are at abysmal levels – the lowest level since the 1940s – currently 49th nationally.” CBIA asserts that California’s average housing costs are two and a half times the national average and that with the current crisis of undersupply, highest-in-the-nation housing costs, and exploding unaffordability ranking at the top of the state’s most pressing political, social and economic concerns, “it would seem that a proposal to add additional cost to a newly built home is ill-advised and at odds with the California’s need to provide affordable housing.”
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With more than 25 years of experience in the real estate development and investment banking industries, Jennifer LeSar brings a diverse background to her work in community development and urban revitalization. Her technical expertise spans from policy and program development to the origination and underwriting of complex investments in equity funds, multi-family portfolios, and historic and low-income tax credit properties utilizing federal and state financing programs.