DMI Blog

Amy Traub

Paying the Builder

Why do we need to build affordable housing? The answer seems obvious: there’s a mismatch between how much money many people have to spend and the market cost of housing. Solutions involve lowering the cost of housing, raising peoples’ incomes, or some combination of both.

But the basic interplay between income and affordability seems to have become lost in the debate over whether developers who receive public money to build affordable housing should be required to pay their employees prevailing construction industry wages. In New York and elsewhere, developers rightly point to the rising need for affordable housing and the shrinking availability of public funding. Paying prevailing wages will push up costs, so for any given amount of funding fewer affordable units can be built, or those units must go to higher income residents who can shoulder more of the cost themselves. The conflict looks like a zero-sum game, with workers and people in need of affordable housing (technically, the non-profit developers who speak in their interest) locked in an irreconcilable battle over crumbs of funding.

Yet construction workers paid lower wages with tax dollars may be the very residents seeking publicly subsidized affordable housing – or for that matter public health coverage to make up for the lack of benefits at their jobs. In other words, the two implacable foes are the same community, if not the same individuals. And what the taxpayers save by hiring cheaper construction labor they may lose if, as a result, those workers must increasingly rely on public services, as the Fiscal Policy Institute points out.

Critics of requiring the prevailing wage for publicly subsidized affordable housing have one further argument. They point out that prevailing wage construction work is often union work, and although construction unions have become more diverse in recent years, they still disproportionately represent white men. It’s an accurate point: diversity gains so far are insufficient, and constructions unions must more aggressively open up apprenticeship programs and the best jobs to women and people of color. Yet this is a perverse argument against the prevailing wage: in effect, developers are arguing that they need to pay less to secure a diverse workforce. Existing racial inequities are hardly a justification for developers to cut wages.

Ultimately there is a strong common interest among tenants and workers in acquiring adequate funds to build affordable housing with a well-paid workforce. And given state and local budget crises, that money needs to come from the federal government. It could be yet another way to provide the next round of economic stimulus our economy needs.

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Posted at 7:48 AM, Jun 04, 2009 in Economic Stimulus | Economy | Housing | Labor | Stimulus
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