Using Union Labor On NYC's 'Affordable' Housing Is Much Less Affordable Than First Thought

New York City Mayor Bill de Blasio’s signature plan to build or preserve 200,000 affordable-housing units over 10 years may be in even more trouble due to a newly revised report from the city’s Independent Budget Office (IBO).

Previously, the city’s Independent Budget Office estimated that using prevailing wages on the project would cost 13% more—or $2.8 billion over the life of the project—than paying market wages.

The prevailing-wage pay standard, generally that in collective-bargaining agreements, raises the cost of city affordable-housing projects by 13%, the IBO said.

At $2.8 billion in costs, there was likely to be some consternation going on in City Hall.

In fact, as far back as last year, while he pushed for prevailing wages for building service workers, Mayor De Blasio refused to commit to construction unions that the project’s building would pay prevailing wages.

The normally pro-labor mayor Tuesday rejected the idea of prevailing wage for construction workers on the theory that the higher costs will scare off developers from building affordable units.
“It’s well known that I am a believer in union labor, but I am also a believer in achieving the affordable housing goals that I put forward,” he said. “The only way to achieve those goals is with an appropriate wage level for the creation of affordable housing, which obviously is not based on the profit motive. It’s based on a very different design.”

That the admission of prevailing wages being too expensive for “affordable” housing, in and of itself, was a startling admission.

However, a newly revised IBO estimate may further complicate the Mayor’s ambitious plan, according to Crain’s New York,.

Using union labor to build affordable housing under the mayor’s ambitious program will be almost twice as costly as previously estimated.

The bottom line: 23% more, or $4.2 billion, which works out to $80,000 per unit.

In January, the almost-always reliable Independent Budget Office issued a report putting the impact of requiring prevailing wage, one tool to mandate union workers, at 13%. It turns out that 12 of the projects that IBO analyzed were labeled as nonunion when they had paid prevailing wage. The erroneous data had been provided by the city’s Department of Housing Preservation and Development.

….

In fact, the IBO now believes the “hard” cost of using union workers is 28% higher, but that builders respond by shaving other development costs to lower the overall number to 23%.

Whether or not this doubling of estimated costs will scuttle the Mayor’s plans for affordable housing remains to be seen.

However, one thing is for certain, if New York taxpayers are footing the bill for his ambitious project, the chances are, they will not be too pleased if they have to pay for a project that cost them $4.2 billion more than needed to be spent.