Homebuilder first in state to use union-only labor
Quito Village follows California's hiring standard that others feel is too oppressive
From the parking lot, there's nothing to suggest that Quito Village is the California housing policy equivalent of a unicorn, or that the project is sitting at the center of a political fight.
Peek through one of the gates of this dirt lot in Saratoga. Trenches, a few foundations and an excavator pawing at a mountain of dirt are the only indications that, if all goes to plan, this will be the site of 90 new townhouses next year.
But though it may not be obvious — even to one of its developers, who was surprised to hear the news — this housing development appears to be one of a kind.
What makes Quito Village unique dates to early 2020 when Sand Hill Property Company agreed to follow a strict labor standard, promoted by some organized labor groups, that favors hiring union workers. The Silicon Valley real estate developer did so to take advantage of a 2017 state law meant to speed up construction of dense housing.
PulteGroup of Atlanta took over the project in 2022 and began construction in September. That makes Quito Village the only known project in California that has broken ground under the law's union-hiring rule.
Lawmakers are debating making that 2017 law permanent, but with a bill that would strike out the unionbacked labor standard.
For many who argue that the union-hire rule places too onerous a standard on developers amid a dire housing shortage, Quito Village is a case in point.
“So that's one in five years,” Assemblymember Buffy Wicks, chair of the Assembly's housing committee, said in an interview. “That to me kind of says it all.”
As lawmakers and unions debate the rule's merits, much of the argument rides on a single question: Can California simultaneously encourage developers to build our way out of the state's housing shortage while also requiring them to reserve jobs for the state's unionized construction workforce?
If PulteGroup is in fact the only company actively building new housing under the terms of this rule, as housing data by the state suggests, how and why it has been able to go forward might shed light on that question.
But it's not clear that the company is following the rule.
PulteGroup's legal team made the case to Saratoga that state law does not obligate the company to abide by the union-backed standard imposed on mixed-income projects, according to emails shared with CalMatters.
The city disagreed.
A year later, Saratoga city staff noted Pulte has not been submitting monthly reports to prove that it is complying with the rule.
“Significant monetary penalties may be imposed under state law for failure to comply,” Saratoga's Community Development Director Debbie Pedro wrote to Brett Walsh, a project manager with Pulte on May 1.
When asked about the project's construction crew, Pulte representative Jim Zeumer said the company only shares “basic project scale, scope and pricing” information.
Under the 2017 law authored by San Francisco Democratic Sen. Scott Wiener, developers are offered a trade:
In cities that haven't kept up with state-set housing production goals, developers can skip some permitting hurdles. In exchange, developers have to set aside some units for low-income occupants and abide by higher labor standards.
For 100% affordable projects, developers have to pay their crews a “prevailing wage,” roughly corresponding to what unionized construction workers make.
But for “mixed-income” projects, where developers meet the law's minimum affordable housing rule but plan to charge market rate on most units, workers must be “skilled and trained.” That means over half must be graduates of apprenticeship programs, most of which are sponsored by unions.
Most developers who use the law have taken the first path.
Developers have invoked the streamlining bill to propose nearly 18,000 units, according to UC Berkeley's Terner Center for Housing Innovation. Roughly twothirds of the projects are entirely affordable.
Of the remaining third that includes market-rate units, Quito Village appears to be the only one that has broken ground.
Some note that the union-hire rules for mixedincome projects might reduce the financial feasibility of projects.
Dan Dunmoyer, head of the California Building Industry Association, said projects that require “prevailing wages” and those that demand a “skilled and trained workforce” tend to have similar payroll costs. The big difference comes down to time, he said.
“When you have to use `skilled and trained,' then you can't move until you find that worker or that contractor,” he said. “That may delay me three or four months per trade.”
Even so, he added, the argument about which higher labor standard ought to apply is academic in most of California. Both are “cost prohibitive other than in the highest-end communities,” he said.
If ever there was a place where higher labor standards could pencil out, it's Saratoga.
The average household income here is nearly $225,000, according to the U.S. Census Bureau. The average listing price of a new home exceeds $3.5 million. Developers can afford to take on higher costs because residents are willing to pay for them.
“Once you add the economics of a high-market community, these extra premium dollars are OK. You're selling townhomes for $1.3 million up, so there's some meat on the bone,” said Steve Lynch, director of planning for Sand Hill Property Company, which got the site ready before selling the residential portion to PulteGroup.
Asked why Sand Hill was willing to do what other developers have thus far been unwilling to do and accept the “skilled and trained” standard, Lynch said that, in fact, it did not.
An initial project approval letter from the city specifies that the project is subject to that union-hire requirement, as does an FAQ listed on the project's website and a letter that Lynch sent to Saratoga's city manager James Lindsay in the company's application. However, Lynch said Sand Hill later determined that the language of the 2017 law actually exempts small towns like Saratoga.
Pulte's legal team seemed to have its own questions about the project's labor requirement prior to taking over.
In an email exchange in the summer of 2022, Winter King, an attorney representing Saratoga, wrote to the developer's lawyer, David Chidlaw, referencing Pulte's questions about “whether your client would be required to use a `skilled and trained workforce' if it acquires the Quito Village project.”
In a subsequent email King wrote, “We don't see a way around this requirement,” adding that compliance with the “skilled and trained” standard is a condition of the project's approval and “required by law.”
King referred questions to the city of Saratoga and Chidlaw did not respond to requests for comment.
The uncertainty over whether the law applies seems to boil down to a question of syntax.
The law carves out an exemption for projects “located within a jurisdiction located in a coastal or bay county with a population of 225,000 or more.” Santa Clara County has nearly 2 million residents. Saratoga has a mere 30,000. Does the 225,000 threshold figure apply to the county or the city? If the threshold applies to Saratoga, the project would be exempt from the “skilled and trained” requirement.
So, too, would projects in the vast majority of California's cities and towns.
Under that stricter interpretation of the law, the “skilled and trained” standard — the subject of years of legislative debate and political gridlock — would only apply to 12 of California's 482 cities.