How Unions Prevent Affordable Housing In San Francisco

Wednesday, July 6, 2022. A Tuesday like any other. Doctors were seeing patients. Retail workers were ringing up customers. Drywall installers were hurriedly finishing interiors on newly built homes.

Actually, no. The drywall installers, or rather the SF Drywall Latherers union, was down at City Hall, throwing its weight around. July 6 was a SF Board of Supervisors Rules Committee meeting. The place where supes propose measures that may wind up on election ballots. Marie Harubiell graciously live tweeted the proceedings.

There were a number of building related items on the docket, and our drywall latherers, as well as other building trade reps, wanted to make sure it was restricted to union labor. But packing BOS meetings was just the beginning.

And odd goal

Building houses in SF – actually apartments, since there’s no more room for actual houses – is a key goal of local politicians. In fact, they often seem to be in competition to see who can commit to building the most units.

But it’s a strange goal, if you think about it. Unlike schools or public safety, attracting thousands of new residents to your city doesn’t improve the quality of life of existing ones – in fact, it reduces the amount of land, roads, water, electricity, etc. available per person.

While some pols may be motivated by a genuine, heartfelt desire to “house the world”, I’d like to suggest a different explanation – that their goal isn’t to build housing at all, but to benefit the special interests that fund their elections and keep them in power. There’s plenty of evidence that this is the case. The special interests in question are organized labor.

Mayor Breed, for example, was elected only with the help of SF’s unions, which in turn rewarded her with money and votes. And the 2022 State Assembly special election has been a battle of unions, with the two main candidates, Matt Haney and David Campos, proudly advertising the influence organized labor has over them.

With this in mind, let’s look at a tweet from Haney about those 100,000 housing units he claims he wants to build:

Is the goal more homes, or funding organized labor?

One answer might be “both” – isn’t building housing while employing folks a win/win? Aren’t jobs at good wages a positive thing?

Well, jobs at fair wages certainly are. But, arguably, unions have taken wages far beyond fair here. For example, a New York Times article titled “Why Does It Cost $750,000 to Build Affordable Housing in San Francisco?“, found that construction workers here earn $90 per hour – $200k/year with a little overtime. That’s about the same as the average physician.

Not only do high labor costs reduce affordability, they prevent some projects from being built at all. Read this article: Bay Area’s largest housing development appears dead. What killed this project? Greedy developers? Zoning laws? City bureaucracy? Nope.

Lennar had run into strong opposition from building trades after refusing to sign a project-wide labor agreement that would have made it an all-union development. The Contra Costa Building Trades Council sought an agreement that was consistent with the city’s Concord First policy, which requires that developers hire 40% Concord residents, pay prevailing wages, hire and train veterans, and commit to approved apprenticeship programs.

The cost of union labor?

The developers said that agreeing to an all-union job site would make the project infeasible, raising construction costs by $542 million and cutting the project’s profit margin from 17% to a loss.

So much for increasing housing stock.

For another example, listen to Michael Cheng, who, in 2017, was building a high rise in San Jose. The total cost of the building, without high end finishes, was $80M. Building somewhere less expensive than San Jose might decrease labor costs by $20-30M, but building in San Francisco would increase them by the same amount. So an $80M San Jose building would cost as little as $50M to construct in a less expensive area, and at least double that in SF, mainly due to labor.

To build homes with inflated labor costs, housing must often be subsidized by taxpayers. Pols have a friendly name for this, “affordable housing“, but there’s nothing affordable about it. It’s simply paid for by increased taxes and enormous amounts of borrowing, benefiting a lucky few lottery winners who get sweetheart deals. Affordable housing is, in effect, a transfer of funds from taxpayers like you to unions and their workers.

Don’t want to use union labor? Prepare to be blackmailed. As attorney and former SF Chronicle columnist noted in a piece entitled, “How a Few Unions Are Hijacking Environmental Law”:

…leveraging the threat of CEQA litigation has been the longstanding strategy of an association of four building trade unions — that demand high-priced no-bid contracts from developers in exchange for an agreement to stand down on meritless CEQA claims.

Robery Selna, 7/3/22

If you’ve made it this far, congratulations! You know more than most people about why housing is so expensive. Let’s test your knowledge with a headline from Heather Knight’s column in today’s Chronicle:

A new S.F. housing complex for homeless people was faster, cheaper to build. So why isn’t it being replicated?

What do you think happened here? If you said: “Someone found a way to build housing with less labor, but the unions are preventing more from being built”, you’re right! From the article:

Another big key to making Tahanan less expensive and faster to build is that it’s composed of modular units crafted at a factory in Vallejo, trucked over the Bay Bridge and assembled like a big Lego project. The factory is unionized, but San Francisco building and trades groups don’t like the building method because it leaves them out. That’s prompted many members of the Board of Supervisors to be leery about approving future modular projects… 

The building was built with union labor, it just didn’t line the right pockets, turning off city leaders. Do they really care about housing affordability? If there’s a more blatant example of how special interests control city government, I don’t know it.

Next time you hear a local pol say, “Let’s create more housing!”, keep in mind that houses don’t get politicians elected in San Francisco – unions do.