After a decades-long battle with California’s building industry, developers who want to fast-track housing production – especially in cities that have not built enough housing to keep pace with rising demand – will be required to pay higher wages and benefits to construction workers beginning Jan. 1.
Five of 15 housing bills signed into law by Gov. Jerry Brown this year include so-called prevailing wage rules for employers and contractors to pay laborers higher wages and benefits for new construction projects.
The requirements, reached after more than a year of negotiations between powerful labor groups and state Democratic lawmakers, represent the biggest expansion of union-backed pay mandates for construction workers since the late 1990s.
Money from a new tax on real estate transactions and a state bond issue will, by official estimates, result in 77,000 new housing units over five years when merged with funds from nonprofit groups, private investors and tax credits for low-income projects.
That’s less than 20 percent of the state’s projected need for additional housing over that period – and it could be years before any of the promised new housing is available. The regulatory fast-tracking in other bills could go further toward filling the need, but no one knows for certain.
Meanwhile, the new tax on real estate paperwork and new mandates to use “prevailing wages” in projects would actually make new housing development even more expensive.
The housing package continues a syndrome one might call “half-a-loafism.”
The official federal poverty measure doesn’t take regional variations in the cost of living into account, so many experts don’t consider it to be the most accurate metric. It’s under “supplemental” poverty measures, dating back to the late 1960s, that California looks considerably different from the rest of the U.S.
Now, researchers at the Public Policy Institute of California and Stanford University are bringing even greater scrutiny to an item that’s consuming more and more of lower-income Californians’ resources: housing.
Their results are startling. When the researchers ran a model of the state’s poverty rate with every Californian bearing costs similar to those in Fresno County, the overall poverty rate declined dramatically — from about 21 percent to 14 percent. That’s nearly 2.4 million Californians who would no longer be in poverty.
The latest quarterly UCLA Anderson Forecast, released Wednesday, estimates how much construction would be required to reduce home prices in the Golden State by even 10 percent, to roughly 2014 levels. “We find that to obtain a modest 10 percent reduction in price requires a little over 20 percent more housing,” economist Jerry Nickelsburg wrote in the forecast, which focused on the state’s economy. “Making housing affordable in California is difficult at best.”
Housing experts say it is the most ambitious move the state has taken in decades – and perhaps ever – to address the issue. They say it is “historic” in part because the state’s housing affordability crisis, with rising home values, skyrocketing rents and rampant tenant displacement, is unprecedented. As costs have grown since the recession, the state has done little until now.
But Californians should not expect the effects to be felt immediately. Even years down the road, the measures will not stop rents from increasing or home prices from trending upwards.
“It’s very hard to get enough housing built to lower the price,” Rosen said. “New funding may build several thousand units, but that’s very small compared to the size of the need. If we make it easier for developers to build housing, the market will be able to better keep pace with demand, and therefore we may be able to slow the rate of increase.”