New Push for Union Wages

Lawmakers, Industry Warm to Construction Issue That Has Long Been Resisted

By ELIOT BROWN

Facing pressure from organized labor, key legislators and real-estate executives are signaling a new openness to an idea they have long resisted: a law requiring union wages for construction of city apartment buildings.

Earlier this year, a bill was introduced in the state Assembly that would mandate significantly higher wages for workers building certain new apartment buildings that use a popular tax break. The requirement, which would drive up costs for hundreds of new apartments every year, has long been advocated by unions but successfully blocked amid resistance from the real-estate industry and the Bloomberg administration.

But now it's showing signs of traction as the real-estate industry grapples with a complex mosaic of political and financial issues in New York and Albany, and some union officials are hoping real-estate executives will concede on the wage policy while they seek to gain ground on other priorities.

Among the issues dominating discussions are laws regarding rent regulation, which sunset June 15; a push by developers to cap taxes on certain rental buildings; and a press by landlords to reverse a court ruling that lowered rents in some older apartments. The Albany legislative session ends next month.

Meanwhile, in New York, the bulk of construction-union contracts expire by the end of June, and real-estate executives are negotiating for concessions on wages and work rules in an attempt to bring down construction costs.

The wage legislation is being sponsored by the chairman of the Assembly's housing committee, Vito Lopez, a Brooklyn Democrat who has previously resisted requests to mandate the use of "prevailing" union-level wages for construction workers.

Steven Spinola, president of the Real Estate Board of New York, said in an interview that the influential real-estate organization still opposes such a law. But he acknowledges he has discussed the issue on multiple occasions with union officials and stopped short of ruling out some kind of deal that would tie this issue with the numerous other debates that are under way.

"We have talked, and that discussion has been a discussion of what the problems are," Mr. Spinola said, noting that it was one of "at least half a dozen issues" under discussion.

Should any accord occur on the issue of union-level wages for apartment buildings it would be sure to spark a political fight.

Developers of low- and moderate-income housing strenuously resist the idea, denouncing it as a giveaway to unions.

Requirements for higher wages would make numerous projects uneconomical, they say, bringing down the number of low-income units built each year. "It's just not good policy," says Ron Moelis, CEO of L&M Development Partners and vice chairman of the New York State Association for Affordable Housing, a developers' advocacy group. "We're focused on trying to point out how damaging this would be to a variety of interests."

The Bloomberg administration also opposes the legislation in the Assembly, and a spokesman for the city's Department of Housing, Preservation and Development said it "would lead to a significant reduction in the amount of affordable housing units created throughout the city."

Union officials counter that there should be higher labor standards for developments receiving tax breaks, and that the legislation exempts from wage requirements developments with fewer than 80 units and those in which at least 50% of the units are "affordable."

"It's something that's a balanced approach to both promoting development and ensuring that when you are giving away large amounts of public subsidies for these developments, that there's a broader benefit," said Paul Fernandes, a spokesman for the Building and Construction Trades Council of Greater New York, a union group.

Still, both sides expect many hundreds of units would face the new requirements annually, if not a few thousand. Developers of large buildings already tend to use all-union labor, but the smaller projects that account for the bulk of the city's new stock of affordable housing typically rely on non-union workers for some or all of their projects.

Given that many union workers are relatively well compensated—skilled carpenters make $46 an hour plus benefits, for instance—the cost savings for non-union labor can be significant. A 2008 study by the Citizens Housing and Planning Council, an affordable-housing advocacy group, found that using union labor pushes up a project's development costs by about 25% versus using non-union labor.

The proposed requirements are included in legislation that would renew a widely used tax break called 421-a, which abates property taxes for new residential developments.

In an interview, Mr. Lopez said the bill represented a "moderation" of his position that was an attempt to offer a middle ground between unions and the real-estate industry that exempts many affordable developments. "What I'm trying to do is come up with a workable solution," he said. "I'm guaranteeing affordable housing will be built without prevailing wage, and I'm facilitating a dialogue."

Mr. Fernandes of the Building Trades declined to describe the discussions his group is having with the Real Estate Board. Mr. Spinola said talks were conceptual and that the sides were not negotiating any specifics.