In a comprehensive report by the RAND Corporation, Jason M Ward dives deep into the construction costs associated with permanent supportive housing funded by Los Angeles Measure HHH. This 2016 ballot initiative mandated the use of Project Labor Agreements (PLAs) for projects consisting of 65 or more units.

Key Insights on PLA's Impact

Cost Increase Due to PLAs

Project labor agreements that enforce union construction labor bring about a significant cost hike in developing permanent supportive housing. The data shows that it raises the cost by 21%, which amounts to an additional $92,700 per unit. For instance, HHH-funded projects without a PLA had an average cost of $585,000 per unit. This substantial increase clearly demonstrates the financial implications of implementing PLAs.Moreover, when comparing PLA projects with non-PLA projects, it is evident that PLA projects took an average of 8 months longer to complete. This extended duration leads to higher financing and other related costs, further adding to the overall expense.

Policy Considerations

Given the findings of this updated study, which relied on actual total development costs (TDCs) from completed projects instead of estimated costs like the 2021 study, policymakers need to carefully consider ways to offset these increased costs. One option could be to cut fees associated with housing development. By reducing these fees, the financial burden on developers can be alleviated, making housing construction more feasible. Another approach could be to reform inclusionary zoning requirements. This might allow for more flexibility in housing development while still ensuring a certain level of affordability. Additionally, offering tax abatements for union-built projects can provide an incentive for developers to choose the PLA route without overly burdening them with costs.In conclusion, as many recent housing production bills, such as SB 423 (2023), require the use of union labor, it is crucial for legislators to explore public policy tools to offset the costs of PLAs. By doing so, they can ensure that housing construction remains financially viable and that the much-needed housing supply continues to increase.