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The Effects of Prevailing Wage Requirements on the Cost of Low-Income Housing

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  • Sarah Dunn
  • John M. Quigley
  • Larry A. Rosenthal

Abstract

Recent California legislation extends the application of prevailing wage regulations to construction workers building subsidized low-income residential projects. Econometric evidence based on micro data covering 205 residential projects subsidized by the California Low Income Housing Tax Credit since 1996 and completed by mid-2002 demonstrates that construction costs increased substantially under prevailing wage requirements. Estimates of additional construction costs in the authors' most extensive models range from 9% to 37%. The analysis controls for variations in cost by geographical location and for differences in project characteristics, financing, and developer attributes. The authors estimate the effect of uniform imposition of these regulations on the number of new dwellings for low-income households produced under the tax credit program in California. Under reasonable assumptions, the mid-range estimate of the prospective decrease exceeds 3, 100 units per year.

Suggested Citation

  • Sarah Dunn & John M. Quigley & Larry A. Rosenthal, 2005. "The Effects of Prevailing Wage Requirements on the Cost of Low-Income Housing," ILR Review, Cornell University, ILR School, vol. 59(1), pages 141-157, October.
    • Handle: RePEc:sae:ilrrev:v:59:y:2005:i:1:p:141-157
    DOI: 10.1177/001979390505900108
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    References listed on IDEAS

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    1. Allen, Steven G, 1983. "Much Ado about Davis-Bacon: A Critical Review and New Evidence," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 707-736, October.
    2. Barry T. Hirsch & David A. MacPherson, 2003. "Union Membership and Coverage Database from the Current Population Survey: Note," ILR Review, Cornell University, ILR School, vol. 56(2), pages 349-354, January.
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    Cited by:

    1. Jaewhan Kim & Chang Kuo-Liang & Peter Philips, 2012. "The Effect of Prevailing Wage Regulations on Contractor Bid Participation and Behavior: A Comparison of P alo A lto, C alifornia with Four Nearby Prevailing Wage Municipalities," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(4), pages 874-891, October.
    2. Matthew Hinkel & Dale Belman, 2022. "Should prevailing wages prevail? Re‐examining the effect of prevailing wage laws on affordable housing construction costs," British Journal of Industrial Relations, London School of Economics, vol. 60(4), pages 761-783, December.
    3. Glaeser, Edward L., 2014. "Understanding housing: The intellectual legacy of John Quigley," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 3-12.

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