Union rule is cited in housing shortfall

Rand study looks at Prop. HHH projects

A requirement to employ a union workforce on larger Proposition HHH projects to house homeless people may have led to fewer units than had initially been anticipated, according to a Rand report released Monday.

The report looked at why the 7,300 units that are expected to be built fall short of the 10,000 figure touted during the campaign to pass the $1.2 billion measure.

Researchers found that a rule, put into place 18 months after the 2016 ballot measure passed, to require that projects with 65 or more units be subject to an agreement with labor unions may have led to 800 fewer units getting

funded. Developers ended up building smaller projects, just below that cutoff, which researchers attributed to the builders wanting to avoid signing a “project labor agreement” with local unions.

Costs were 14.5% higher on projects with such agreements, typically around $43,000 more than for projects without one, researchers also said.

The report recommended more transparency about such requirements in initiatives and legislation, in order to set more realistic goals for these kinds of programs.

“Moving forward, considering the effects of these sort of labor requirements on the primary goals of public housing policy and making sure they are clearly communicated to the public would improve transparency and help ensure that realistic goals are set for such programs,” said Jason M. Ward, the report’s author.

Project labor agreements with unions tend to have various rules around hiring authority, worker ratios for union and nonunion workers, clauses that guarantee no strikes or lockouts, and targeted hiring of local residents and people from disadvantaged communities.

Researchers said it was unclear why developers

seemed to have worked to avoid such agreements.

Many developers of permanent supportive housing for homeless people tend to be “nonprofit, mission-driven developers, so the type of profit motive that might motivate traditional developers of market-rate housing is largely absent in this setting,” the report said.

The researchers conjectured that such agreements might add uncertainty to projects that typically already

face high uncertainty.

“Deeply subsidized affordable housing projects already face considerable uncertainty related to community opposition, assembling the necessary funding, and uncertain timelines for regulatory approvals,” the report said.

Another potential reason is costs may have prevented the projects from penciling out as financially viable.

A 2019 audit by the Los

Angeles city controller’s office had also pointed to the lower-than-anticipated number of units being built with Proposition HHH funding, citing costs that exceed projections.

While the Rand report this week says developers tended to avoid projects that would be subject to a labor agreement, Controller Ron Galperin had attributed the high cost of the projects partly to such agreements, along with many other factors.