A bill circulating in Sacramento could make home buying just a little bit harder. AB 199 would apply prevailing wages for labor building private homes, with those in the building industry saying that would have a drastic effect on home prices.
Prevailing wages are similar to a state-mandated minimum wage, except they only apply to public works construction projects. What AB 199 would do is classify private home building on private land as public works projects if they receive any type of benefit, such as a fee credit for building a park or water line. That could trigger the prevailing wage rate, as some have argued.
Assemblyman Kansen Chu (D-San Jose) is proposing AB 199, titled “Public works: private residential projects.” It changes Section 1720 Section 1 (c)(1) of the Labor Code, to read:
Private residential projects built on private property are not subject to the requirements of this chapter unless the projects are built pursuant to an agreement with a state agency, redevelopment agency, or local public housing authority. the state or a political subdivision.
Mike Prandini, president of the local Building Industry Association of Fresno/Madera Counties says the difference in prevailing wage and market rates is double. He estimates that would increase the cost of a 2000-square foot home would be $40,000.
Chuck Riojas, Financial Secretary/Treasurer of the Fresno, Madera, Kings and Tulare Counties Building & Construction Trades Council, AFL-CIO does not believe prevailing wage rates will cause labor rates to increase. “People working for less are working for under the market rate are selling themselves short for what their labor is worth. Prevailing rate is market rate,” Riojas says.
According to public documents and GV Wire research, there are differences in the rates. An HVAC technician would see a 47% jump in wages and benefits; for an electrician, that number jumps at least 55%
“You would be pricing a lot of people out of the market and in addition you would be raising rents considerably too,” Prandini warns.
Estimates range widely of how much this would increase overall costs. Analyst group Xpera says 30%. The California Builders Industry Association says 37%. Beacon Economics says a similar proposal in Los Angeles increased costs 46%.
So, a house going for $325,000? That could now become $422,500 at the very least. GV Wire spoke with Beacon Economics analyst Robert Kleinhenz, who sees AB 199 causing an adverse effect on the home building industry.
“A measure such as this could easily increase the cost of that new construction…could really temper the levels of construction, which are already pretty moderate and well below what we’ve seen in the last decade. And, so, it can have a lot of adverse effects all the way around in the local economy,” he tells GV Wire.
Assemblyman Kansen Chu, in a statement to GV Wire says:
“I authored AB 199 to ensure workers receive their fair wages owed to them by law. Our prevailing wage laws were established to provide equity, ensuring construction workers are compensated fairly on projects paid for fully or in-part by public money. This bill will clear up any ambiguity for stakeholders involved in the development of a public project as it relates to our prevailing wage requirements.”
In November, Chu won re-election to the assembly, now serving his second term. Union labor was some of his top financial supporters. A partial list includes:
California State Council of Laborers PAC Small Contributor Committee $17,000
State Building and Construction Trades Council of Cal PAC $8,500
State Building and Construction Trades Council of Cal $8,500
California Labor Federation, Committee on Political Education $4,200
The first committee in Sacramento to hear the bill isn’t one that deals with housing, but rather the Labor & Employment committee. That takes place Wednesday, March 15 at 1:30p at the Capitol.
Contact David Taub
Phone: 559-492-4037 / e-mail
[Disclosure: GV Wire is owned by Granville Homes. This story covers AB 199, on which Granville is expected to take a stand. GV Wire operates independently. This story was not subject to corporate approval. Some of the video in this story was shot on property owned by Granville.]