Cost of housing projects could rise

Amendment to bill seeks 'prevailing wage'

Builders of large affordable housing projects in Massachusetts would be required to pay construction workers higher wages, based on a little-noticed amendment to a housing bond bill moving through Beacon Hill.

If adopted, the amendment would drive up construction costs on those projects, which would reduce the buying power of the housing bond. The legislation would authorize more than $1 billion in funding for affordable housing; about half the money would be available to subsidize development by nonprofit and for-profit companies.

The amendment would require developers to pay a "prevailing wage" to workers on projects of at least 75 units or at least $25 million in total development costs. Massachusetts already requires payment of a prevailing wage on government construction projects.

"Prevailing wage" is a legal term that means the state Department of Labor sets minimum hourly rates, which can be twice as high as the hourly rates paid to nonunion workers doing the same job.

A 2007 study by the Massachusetts Housing Partnership of multifamily developments between 2002 and 2006 found projects that paid prevailing wages spent 34 percent more on each unit, or about $60,000 per unit.

Some affordable housing advocates say the amendment promotes one public good at the expense of another: higher wages, less housing.

"It's likely to increase the cost of developing affordable housing significantly," said Aaron Gorstein, executive director of the Citizens Housing and Planning Association, an affordable housing umbrella group. "It could lead to fewer units being available for low- and moderate-income families."

Supporters say it is silly to juxtapose affordable housing and higher wages. Both kinds of spending work toward the same purpose. Subsidizing construction makes housing more affordable. So does paying higher wages.

"It's ironic that you would want to pay workers as cheaply as possible to build housing for poor people," said Karen Courtney, director of the Foundation for Fair Contracting of Massachusetts, a private group that monitors compliance with prevailing wage laws. "It seems to me the government should be promoting good jobs and affordable housing, and this is a way to do that."

Courtney also said the amendment reflected the will of Massachusetts voters, who supported the requirement to pay prevailing wages on public projects. If the state pays a prevailing wage when it builds the project, it also should pay a prevailing wage when it helps fund the project, she said.

The housing bill has been passed by both the House and the Senate, but the amendment was only passed by the Senate. State Senator Anthony Galluccio, Democrat of Cambridge, the author of the amendment, said it also has the support of the Patrick administration. The bill is currently in a conference committee of House and Senate members to reconcile the differences between the versions.

The amendment would apply to a substantial amount of construction. The state's Affordable Housing Trust Fund in 2006 made predevelopment loans to projects containing 2,786 units of affordable housing. About a quarter of those units are in projects of 75 units or more.

Supporters of the amendment say some of those projects already would pay prevailing wages. But affordable housing developers say that's only true in Boston and a few other cities. The 2007 study by the Housing Partnership found 9 of 24 surveyed affordable housing projects paid prevailing wages. The three largest projects, all in the Boston suburbs, did not.

The largest project that received affordable housing funding in 2006 is a development of 146 units in Haverhill. The developer is Beacon Companies, one of the area's largest private developers of affordable housing. The company did not pay prevailing wages on the project.

Beacon's president, Howard Cohen, said the amendment would have a significant impact on the company's projects.

"Everything would be more expensive," Cohen said. "The state would either have to spend more money or get fewer units."

Cohen declined to provide wage data for his projects, but a private survey of Massachusetts developers by a Michigan company, PAS Inc., shows average wages run well below prevailing-wage levels.

The Department of Labor estimates a prevailing wage of $34 an hour for carpenters employed on single-family wood-frame construction. PAS calculates the average rate for nonunion carpenters at about $21 an hour.

Galluccio said workers paid a prevailing wage built better homes. He said such projects also were completed more quickly, based on his experience overseeing affordable housing projects as a member of the Cambridge City Council.

Most important, he said, affordable housing projects need support from the communities around them, and paying higher wages builds support.

"The affordable housing movement is a fragile one, and I think both organized labor and affordable housing fall under a progressive umbrella that needs to stand together on these issues," Galluccio said.

Gorstein said CHAPA would favor a compromise that restricted the wage requirement to projects with $30 million in construction costs, rather than $25 million in total development costs.

Binyamin Appelbaum can be reached at bappelbaum@globe.com.