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The Effects Of Prevailing Wage Requirements On The Cost Of Low-Income Housing

October 3, 2005
By Sarah Dunn, John M. Quigley, Larry A. Rosenthal

In this study, University of California-Berkeley Program on Housing and Urban Policy research associate Sarah Dunn and executive director Larry A. Rosenthal join UC-Berkeley economics professor John M.

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In this study, University of California-Berkeley Program on Housing and Urban Policy research associate Sarah Dunn and executive director Larry A. Rosenthal join UC-Berkeley economics professor John M. Quigley to study the effects of California’s prevailing wage laws on construction costs of low-income housing.

Ceteris paribus, low-income housing projects were significantly more expensive if developers were required to pay prevailing wages,” they write. “Increases in project cost due to prevailing wage regulation surely lead to reductions in the number of newly constructed low-income housing units produced through public subsidy.”

“And at a cost increase of 37.2%—our upper bound estimate—the imposition of prevailing wage legislation would have prevented 4,253 lowincome housing units from being developed,” they add. “In this way, state regulation of construction wages conflicts with the federal goal of increasing access to new housing for California’s low-income households.”