A NEW GENERATION OF CONSTRUCTION TRADE WORKERS
Construction costs are one of the most significant barriers to the production of affordable housing. The NYC Prevailing Wage for electricians, carpenters, plumbers, and laborers is double or triple the wage costs to employ these tradesmen in the greater metropolitan area. Quite simply, that increases the cost of producing affordable housing by up to 30%.
Because this is housing targeted to specific income bands, there is no ability to increase debt when using conventional financing, which is often found in the capital structure of affordable housing projects. As such, in order to finance the additional costs required by prevailing wages, government is required to provide those additional funds. Given the environment of restricted and constrained government resources, the only result of this is a reduction in the number of units that can be produced. If all projects were subject to the NYC prevailing wage, you would likely cut production in half.
As developers of affordable housing, we have been struggling with the cost of producing affordable housing for many years. We have aimed not only to meet a critical demand for housing in NYC, but also to rebuild challenged communities. In order to do so, many developers have devised ad hoc recruitment and training programs to offer job opportunities to unemployed neighborhood residents. We must broadly expand this work under the leadership of our next mayor.
The next mayor must mandate a labor partnership that includes REBNY, NYSAFAH, the Building and Construction Trades Council, CUNY, and NYCHA to address the needs for construction cost containment and the increased demand for affordable workforce housing. Our aim should be to invest in training and supporting unemployed and underemployed New Yorkers from transitioning neighborhoods where the majority of affordable housing is being built, and provide an economically sustainable pathway for a new generation of construction trade workers.
Donald Capoccia is the Managing Principal and Founder of BFC Partners, a real estate development company focused on the production of affordable housing.