Haven’t We Learned Yet? More Legislation that Adds to Housing Costs

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

Housing costs too much in California. But, while legislators wring their hands over the housing crisis they often pass laws that boost the cost of housing. The latest proposal that would increase housing costs is AB 199 by Assemblyman Kansen Chu.

The proposed law would end an exemption on prevailing wage rates for private residential developments. Prevailing wage is required in public work projects. The prevailing wage rate is the basic hourly rate paid on public works projects to a majority of workers engaged in a particular craft, According to the state Department of Industrial Relations, “California’s prevailing wage laws ensure that the ability to get a public works contract is not based on paying lower wage rates than a competitor.”

But this law has never applied to private homebuilders.

Assemblyman Chu argues that the bill only affects projects that use tax dollars. However, building industry representatives say the measure is broader and can affect private developments. For example, if tax dollars are used to construct nearby streets and sidewalks the proposed prevailing wage mandate would kick in.

Citing a Beacon’s Economics study in Los Angeles, Dave Cogdill, president of the California Building Industry Association, noted in an opinion piece that “prevailing wage increases the labor costs of a project by an average of 95.3 percent, with many occupations’ mean hourly rate doubling.”

He added that the Business Council of San Joaquin County claims the cost of a 1,500 square foot home would increase by $75,000.

The California Chamber of Commerce labeled AB 199 a Job Killer bill and cited a study in a release that for every $1000 increase in housing prices, 15,000 buyers are priced out of the market.

Housing costs are a major reason for losing middle class residents and for the adjusted poverty level measures in California. Housing costs act as a hurdle for business bringing in or keeping necessary talent.

Given that policymakers, the business community, and the state’s residents who would like to buy a home all agree that housing prices in the Golden State are out of control, why is the legislature considering bill that would add to costs?

What the legislature should be doing is to figure out ways to reduce laws and regulations that add to the cost of housing so as to ease the state’s difficult housing crisis.

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