Homebuilders release study about prevailing wage laws, construction costs and impact on housing prices

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New home roof construction with wooden house frame (istockphoto)

The California Homebuilding Foundation (CHF), a nonprofit organization supporting the construction industry though scholarships, research and education, has funded a study conducted by the Blue Sky Consulting Group, a public policy and economics consulting firm, entitled, Impacts of a Prevailing Wage Requirement for Market Rate Housing in California.

This study identifies the various economic and labor-related challenges facing the construction industry if the State of California were to implement new prevailing wage requirements.

Prevailing wage laws have typically been required for constructing government-funded projects; however, legislation introduced earlier this year will subject privately financed housing projects to prevailing wage requirements.

Authors Matthew Newman and Shawn Blosser with Blue Sky Consulting Group conducted an empirical analysis of market rates compared to prevailing wage rates to estimate hourly wage increases for residential construction professionals, followed by an assessment of the effects these increases could have on housing affordability and available jobs in the residential construction workforce.

Key study findings indicate:

  • Hourly wage rates would increase by a minimum of 39 percent to upwards of 116 percent for construction laborers;
  • average statewide prevailing wage costs would increase by 89 percent;
  • overall costs of construction would increase by 37% or $32 per square foot of residential space; and
  • $84,000 of valuation would be added to the total cost of building a new home in California.

The CHF says in a news release that the study determined that raising labor costs would lead to decreased homebuilding production, fewer available affordable housing units and reduced opportunity for employment in the construction sector.

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