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

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

Abstract

Recent California legislation extends the application of prevailing wage regulations to subsidized low-income residential construction projects. This paper estimates the cost and supply effects of this legislation. Econometric evidence based on recently completed tax-credit projects in California demonstrates that construction costs increase substantially under prevailing wage requirements. Estimates of additional construction costs in our most extensive models range from 9 to 32 percent. The analysis controls for variations in cost by geographical location and for differences in project characteristics, financing, and developer attributes. We 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. Under reasonable conditions, our mid-range estimate of this prospective decrease exceeds 2,600 units per year.

Suggested Citation

  • Dunn, Sarah & Quigley, John M. & Rosenthal, Larry A., 2005. "The Effects of Prevaling Wage Requirements on the Cost of Low-Income Housing," Berkeley Program on Housing and Urban Policy, Working Paper Series qt9621c051, Berkeley Program on Housing and Urban Policy.
    • Handle: RePEc:cdl:bphupl:qt9621c051
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    1. 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.
    2. 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.
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    Cited by:

    1. Glaeser, Edward L., 2014. "Understanding housing: The intellectual legacy of John Quigley," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 3-12.
    2. 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.
    3. 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.

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