STAFF REPORT
DATE: July 30, 2024
TO: Justin Hess, City Manager
FROM: Patrick Prescott, Community Development Director V IA: Fred Ramirez, Assistant Community Development Director Scott Plambaeck, Planning Manager
Daniel Villa, Principal Planner
BY: Greg Mirza-Avakyan, Senior Planner
David Kim, Senior Planner
SUBJECT:
Review of the Cost and Benefit Analysis of Potentially Implementing Construction Workforce Program s/Policies, including Prevailing Wage, Skilled and Trained Workforce, Apprenticeship, and Local Hire on Housing Developments
RECOMMENDATION
1. Note and file.
2. Provide staff with feedback regarding the cost and benefit analysis of potentially implementing construction workforce programs and policies on housing development projects for consideration as work progresses on potential future updates to the City’s Inclusionary Housing and Density Bonus Ordinances.
BACKGROUND
In accordance with the City’s adopted 2021- 2029 Housing Element, the Community Development Department was tasked with updating the City’s Density Bonus and Inclusionary Housing Ordinances (Housing Element Housing Programs #10 and #11). As part of this effort and in response to requests received from several labor union organizations, the City committed to evaluating the potential impacts and benefits of implementing construction workforce programs and policies on new housing developments (e.g., prevailing wage, skilled and trained workforce, apprenticeship, and local hire). This evaluation included preparation of an economic analysis that evaluates the potential cost impact s construction workforce programs and policies may have on housing developments. The goal of the analysis is to have a better understanding of the implications of implementing construction workforce programs and policies to help ensure that City actions do not inadvertently create undue constrains on housing production as the City continues to make progress in meeting its housing production goals ( City’s
COMMUNITY
DEVELOPMENT
2 Affordable Housing Strategy to facilitate for 12,000 new units by 2035) and state mandated Regional Housing Needs Assessment (RHNA) allocation for the 6th Planning Cycle (8,772 new units by October 2029).
Currently, unless there is a proposal subject to the State Streamlined Ministerial Review process, such as Senate Bill (SB) 35 or Assembly Bill (AB) 2011, the City does not have existing regulations that require privately funded housing projects to comply with construction workforce programs or policies.
DISCUSSION
In response to Housing Element Programs #10 and #11, City staff has prepared a “Prevailing Wage and Skilled and Trained Workforce Cost/Benefit Analysis” (Report). The Report was prepared by staff with the assistance of BAE Urban Economics (BAE), a consultant with expertise in affordable housing and workforce programs or policies.
BAE completed several tasks in preparation of the Report:
1) S urveyed cities in California that have construction workforce programs and policies implemented on housing projects;
2) C onducted literature review on prevailing wage and other workforce programs; 3) Host ed a stakeholder roundtable meeting and individual interviews (i.e., union labor groups, market-rate housing developers and affordable housing developers); and,
4) P repared a cost model analysis that analyzed impacts these construction workforce programs or policies could potentially have on a project’s overal l construction cost. The studied workforce programs or policies include prevailing wage, skilled and trained workforce, apprenticeship, and local hire.
The Report (Attachment 1) is organized to provide an overview of the studied construction workforce programs and policies
1. In addition, t he Report also provides findings that summarize potential impacts and benefits associated with construction workforce programs – including potential impacts on construction costs.
Report’s Findings
The Report found that there would be both benefits and impacts associated with implementing construction workforce programs and policies ( Attachment 2). Staff had found that the potential benefits of implementing prevailing wage and other workforce programs on private housing development projects are less tangible and there wasn’t any specific literature that looked at the benefits of workforce program implementation in privately funded projects. However, based on interviews with labor union representatives, the Report identifies several benefits such a s that: (1) a skilled workforce will deliver higher quality projects more efficiently and with fewer workplace accident s, and (2) a prevailing wage provided to skilled and trained workforce and their families would reduce dependence on social safety net programs
2. 1 The definitions of the several construction workforce programs/policies considered are found on pages 3-4 of the Report. 2 Social safety net programs support low-income adults and families in meeting basic needs. Programs include Medicaid, Earned Income Tax Credit, Temporary Assistance for Needy Families, and the Supplemental Nutrition Assistance Program. 3 The Report also aimed to identify the potential impacts on construction cost associated with applying construction workforce programs or policies on private housing projects.
Using construction cost models, the Report considered several prototypical housing projects (i.e., 87 units per acre; 62 units per acre; 36 units per acre; less than 20 units housing development). These specific types of residential density were selected to be analyzed because these were the projects that Burbank has typically seen proposed or could potentially be proposed in the future. Overall, the Report’s general finding was that implementing construction workforce programs or policies would result in increased construction costs as follows:
1) Prevailing Wage and Skilled and Trained Workforce - 16.4%3 2) Apprenticeship Program - 14.1%4
3) Local Hire Program - 1.7%.
The cost model analysis looked at how these workforce programs would individually impact construction cost.
Surveyed Cities
In preparation of the Report, staff surveyed 11 California cities, and found that six of them have implemented construction workforce programs or policies for privately funded housing developments (Berkeley, Hayward, Santa Ana, Los Angeles, Pasadena, and San Francisco). An in-depth review of each city policy/program can be found in Appendix B:
Surveyed City Policies and Interviews of Attachment 1. However, a few of the policies or programs from the surveyed cities are highlighted below:
• Berkeley’s Hard Hats O rdinance, adopted in September 2023, require s apprenticeship programs for all developments of at least 50,000 square feet of floor area. The apprenticeship requirement can be satisfied either by participation in an apprenticeship program or thr ough making equivalent contributions to the California Apprenticeship Council fund.
• Pasadena’s First Source Local Hiring P rogram, adopted in 2004, requires public works projects to prioritize the hiring of residents and incentivizes developers to hire Pasadena residents. While the program is mandatory for public works projects, it is voluntary for private development. Under the vol untary program, a portion of Pasadena’s city construction tax is rebated to the developers if they provide confirmation that a at least 15 percent of wages are paid to City of Pasadena residents. Since the program was first created, one housing project has successfully complied and received the rebate.
• City of Santa Ana’s Inclusionary Zoning Ordinance, adopted in April 2022, allows developers the option of paying an in- lieu fee rather than providing a require d percentage of affordable units (starting in 2026). For projects of 20 units or more, if the developer decides to pursue the in-lieu fee option, at least 30% of the project workforce would have to be skilled and trained workforce with 35% local hire compliance.
3 It should be noted that Prevailing Wage and Skilled and Trained workforce were analyzed together, since these two programs ar e almost always implemented concurrently.
4 Apprentice programs assume a skilled and trained workforce and prevailing wage. 4 Given that implementation of some of these programs or policies is recent, staff was not able to get updates on the effectiveness of these programs/policies.
State Housing Laws
It is important to note that there are existing or established State housing laws that require workforce programs in exchange for streamlined ministerial approval of housing developments. Examples include state statutes approved through SB 35, SB 423, or AB 2011 (Attachment 1, Appendix A), where certain qualified housing projects could be subject to prevailing wage and workforce training requirements. These housing statut es provide examples of private housing developments being subject to prevailing wage and workforce training requirements. Acco rding to City records, since 2020, the City has received over 30 proposed housing projects (not including ADUs or new single- family dwelling). Over 20% of these submittals were SB 35 projects.
COMMUNITY OUTREACH
In December 2022, a roundtable stakeholder meeting was completed. The virtual meeting invitation was provided to community stakeholders who have interest and experience with the topic of housing development and construction workforce programs and policies. The purpose of the roundtable stakeholder meeting was to introduce the Project to stakeholders and receive their initial feedback and comments on the subject topic. On June 6, 2024, to ensure members of the public had an opportunity to learn about and ask questions on this topic, an online informational community meeting was held during which staff presented the findings of the Report. A summary of the community meeting and related marketing is provided (Attachment 3).
ENVIRONMENTAL REVIEW
This study session is categorically exempt in accordance with the California Environmental Quality Act (CEQA) of 1970, under Article 19 - § 15306 (Information Collection). Staff determined the report to be consistent with this CEQA Categorical Exemption as the purpose of the report is intended to provide data and research strictly for information gathering where there is no lead agency action to approve or adopt an action.
FISCAL IMPACT
There is no fiscal impact associated with consideration of the information contained in this report. The purpose of this report is to provide the Council with a summary of the Report’s findings in accordance with Housing Element H ousing Programs #10 and #11 of the adopted 2021-2029 Housing Element. Any requests for future and unfunded work would be brought forth for Council’s consideration at a later date.
CONCLUSION
The City does not currently require compliance with construction workforce programs and policies for private housing developments. However, Housing Element Program #10 and #11 call for the analyzation of potential impacts and benefit s associated with implementing potential construction workforce programs and policies on new housing developments. Furthermore, in the past several years, the State has enacted housing bills that have created streamlined ministerial approval process es for qualified housing 5 projects and have certain provisions that require prevailing wage or use of skilled and trained workforce. The City has also adopted multiple ordinances in response to SB 35 and AB 2011.
Staff requests that Council provide feedback regarding the presented cost and benefit analysis that are associated with application of the noted construction workforce programs and policies on housing development projects. This feedback will assist staff in the analysis of this subject matter as work progresses on potential future updates to the City’s Inclusionary Housing and Density Bonus Ordinances . Specifically, Council feedback will be considered as staff develop the construction cost impact analysis that is prepared as part of the Inclusionary Housing Economic Feasibility Analysis. Once the economic feasibility analysis and draft updates to the Ordinances are completed, there will be an opportunity for the community to review and provide comments before any proposed ordinances are considered by the Planning Commission and presented Council for review and adoption. This will ensure that the City balances its housing needs, while taking a sensible approach to stakeholder concerns and community benefits to ensure an equitable, sustainable, and livable community.
ATTACHMENTS
Attachment 1 – Prevailing Wage and Skilled and Trained Workforce Cost-Benefit Analysis Report
Attachment 2 – Summary of Potential Impacts and Benefits of Construction Workforce Programs and Policies
Attachment 3 – Summary of Community Meeting Discussion on June 6, 2024