UC Berkeley Study: PLAs Offer Superior Cost Performance in Affordable Housing Construction

This guest column was written by Research and Advocacy Director Alex Lantsberg of the San Francisco Electrical Construction Industry, the joint labor management committee run by IBEW Local 6 and the San Francisco Electrical Contractors Association.

The Labor Center at the University of California–Berkeley earlier this month released an analysis of Los Angeles’ Proposition HHH Community Workforce Agreement, a project labor agreement (PLA) that resulted from L.A.’s popular 2016 measure to fund and develop affordable supportive housing.

The Labor Center’s study concluded that L.A.’s Prop HHH PLA offered superior performance in controlling construction costs while employing local workers to deliver affordable housing for Angelenos. The analysis complements the Labor Center’s groundbreaking 2022 research on the public costs of low-wage and exploited labor in California’s construction industry. It also arrives at a pivotal time, with elected officials at the local, regional, and state levels debating whether to adopt PLAs to realize a variety of affordable housing initiatives.

Taken together, the Labor Center’s analyses demonstrate the benefits to taxpayers and workers of a construction industry built on a foundation of union labor.

This is obviously good news — not that those of us in the building trades didn’t know it already. Public-sector PLAs have long been recognized as critical tools to stabilize workforce needs in major infrastructure projects. Evidence from PLAs implemented across the United States shows that these agreements foster safer and more inclusive jobsites as well as higher on-time and on-budget project completion rates, all while increasing satisfaction among employers and project owners.

Further research by the U.S. Department of Labor illustrates the role of PLAs in establishing apprenticeships and other training programs, in addition to expanding employment opportunities for workers of color and women in an otherwise predominantly white- and male-dominated industry. Though some researchers have argued that PLAs can drive up costs by limiting bidders, the only peer-reviewed analysis of how PLAs impact bidding competitiveness concluded that PLAs have no significant effect on the number of bidders, even when controlling for project size and other relevant factors.

One of those critical studies was recently released by nonpartisan think tank the Rand Corp., which conducted an analysis of the Prop HHH PLA and contended it resulted in more expensive projects as developers built smaller, more expensive projects to avoid the PLA’s provisions.

The study, however, has faced criticism from construction industry researchers for its methodological flaws.

The Labor Center’s Prop HHH PLA analysis digs into the controversy using similar methods as the Rand study but does some things the prior studies do not: It uses actual post-completion costs and incorporates numerous controls for project characteristics, including unit mix, wage requirements, and supportive housing provisions. It also adjusts for construction cost fluctuations over time, among other factors.

In the end, the fact remains that no evidence could be found that the Prop HHH PLA had caused an increase in per-unit costs for affordable housing projects developed under the plan.

Research into the effects of PLAs on affordable housing construction is still emerging as the dire need for affordable housing and the inadequacy of federal support has forced local and state legislators to put forward a variety of funding initiatives. While completed shortly before Prop HHH passed, a 2015 study by Peter Philips and Scott Littlehale comparing nine affordable housing projects to 121 similar non-PLA projects between 2008 and 2012 contradicts the Rand Corp. study’s findings, indicating that no meaningful cost impacts could be accounted for in the PLA projects.

Only time will tell how well PLAs perform in the long run, but the results of this rigorous early research are promising.

Back to the importance of the Labor Center’s recent study. It complements UC Berkeley’s long-standing effort to examine how low-wage employers rely on taxpayers to fill the gap between what they pay their workers and the costs of a dignified life for those workers. In 2021, the Labor Center examined the residential construction industry and found that nearly half of California’s construction worker families are enrolled in safety net programs such as Medicaid, food assistance, and housing assistance at an annual cost of more than $3 billion.

The residential construction industry already legally offers workers low wages and minimal benefits, but employers also often use illegal practices to minimize their labor costs even more. For instance, misclassified workers earn just 67 cents for every dollar earned by comparable employees with median wages for frequently misclassified occupations in California.

The Labor Center’s research lends weight to calls to extend PLAs for affordable housing construction in the Bay Area. State and regional policymakers are currently debating whether to require PLAs for a $10 billion regional affordable housing bond or accept a lower-tier labor standard developed for private streamlined projects. San Francisco’s building trades, fresh from a successful performance review of the Citywide PLA, are in a dispute with the City about ensuring that the PLA’s benefits extend to affordable housing construction funded by public dollars.

The use of PLAs in affordable housing construction can be a powerful tool for controlling costs and securing local labor while advancing equity goals. The Labor Center’s analysis of as-built construction costs from L.A.’s Prop HHH PLA demonstrates superior cost performance for completed projects, while broader reviews point to increased employer and end-user satisfaction, on-time performance, and jobsite safety. Moreover, it proves that PLAs, as a response to the low labor standards and straight-up labor law violations that are so common in residential construction, can go a long way as a remedy.

Covering new affordable housing initiatives with PLAs is a good idea for policymakers. Why not rejuvenate our housing stock both cost-consciously and ethically?