NAHB Actively Engaged in Labor Law Proposal that Could Harm Housing Affordability

The U.S. Department of Labor (DOL) has proposed new labor rules that would dramatically change long-existing “ prevailing wage” standards for federal construction projects. NAHB opposes many of the changes and was represented at a roundtable April 25 hosted by the Small Business Administration.

On March 18, the DOL’s Wage and Hour Division issued a proposed rule to amend the regulations implementing the Davis-Bacon and Related Acts (DBRA). In particular, the agency proposes to change the definition of “prevailing wage” by returning to the original methodology used to determine Davis-Bacon wage rates, also known as the “three-step process.”

The Davis-Bacon Act was passed in 1931 to require federal government construction contractors on covered public buildings and public works to pay the “prevailing wage” to laborers. During the Reagan administration, many changes to the act were implemented, including on calculations of the prevailing wage. DOL's proposal reverses many of the changes made some 40 years ago.

While the provisions do not directly impact many home builders, multifamily developers who build federally funded low-income housing would be significantly affected.

One example of a proposed change is to undo the Reagan-era separation of rural and urban wages in the prevailing wage calculation. If this happens, urban wages will dominate and drive up the prevailing wage of projects in rural areas where market wages are lower.

At a roundtable hosted by the Small Business Administration's Office of Advocacy, former NAHB Chairman Kevin Kelly spoke to DOL officials about his experience with projects in an urban area of Philadelphia and one outside of the city, and how the new rules would negatively impact the project outside the city.

Kelly also noted that many subcontractors do not accept work on DBRA contracts due to administrative and compliance burdens, and this proposal from DOL would exacerbate the problem.

Other NAHB members said that now is not the time to issue this proposal when the home building industry faces historic worker and supply shortages and continues to recover from the economic impact of the COVID-19 pandemic.

NAHB is very concerned these changes not only would artificially inflate costs to build much-needed affordable housing units, and thereby reduce the overall number of units available to low- and moderate-income households, but members also stated this proposal fails to address the systemic flaws of the wage determination process.

The deadline for comments on the proposed rulemaking is May 17, and NAHB will be filing comments before the deadline.

Members interested in commenting should check the Federal Register entry for more details.