Los Angeles PLA Mandate Delivered Fewer Projects and Increased Construction Costs, Study Finds

0 October 4, 2021  Featured

A study published in August by the Rand Corporation found that a bond measure passed by voters in 2016 failed to deliver on its intended results, largely because of the existence of a project labor agreement.

In 2016, voters in Los Angeles approved a bond measure, formally known as Proposition HHH, which allowed city housing officials to issue $1.2 billion in bonds to construct safe and affordable housing for homeless people and those in danger of becoming homeless. Eighteen months after the bond measure was approved by voters, the Los Angeles City Council passed a requirement that projects with 65 or more units be subject to a government-mandated PLA, despite opposition and warnings from construction groups and housing advocates that the requirement would lead to negative outcomes.

Four years after the city council approved the PLA mandate policy, Rand Corp. has analyzed the results and consequences of these policies. The data paints a bleak picture for government-mandated PLA advocates. Amongst other findings, Rand Corp. found:

  • Developers responded to the requirement to use a PLA on projects of 65 units or more by disproportionately proposing housing projects that fell below the 65-unit threshold. According to the study, 22 of the 98 total new construction projects in the data are in the narrow range of 60 to 64 units, while there was just one proposed project falling between 65 and 69 units.
  • Per unit construction costs were approximately $43,000 higher for projects covered by the PLA when accounting for other factors impacting the cost of construction.
  • PLAs increased construction costs by 14.5%.
  • In a simulation exercise, the researcher estimates that, in the absence of a PLA, approximately 800 additional units or an increase of 11% more housing units could have been produced with the funding allocated to date.

This study is consistent with decades of research that shows government-mandated PLAs can drive up the cost of construction projects between 12 to 20% and discriminate against the 87.3% of U.S. construction workers who choose not to join a union. PLAs typically ensure construction contracts are:

  • Awarded only to companies that agree to recognize unions as the representatives of their employees on that job;
  • Use the union hiring hall to obtain workers at the expense of existing qualified employees;
  • Obtain apprentices through union apprenticeship programs;
  • Follow inefficient union work rules;
  • Pay into union benefit and multiemployer pension plans workers will never benefit from unless they meet vesting requirements;
  • Force workers to pay union dues and/or join a union as a condition of employment.

Special interest giveaways like government-mandated PLAs undermine the will of voters to the benefit of politically connected construction unions. The findings of this report should make supporters of government-mandated PLAs have to answer one question the next time they debate a government-mandated PLA: Do you stand with the will of the voters and support sound public policy that addresses pressing issues or are you willing to sacrifice those principles for the political support of construction unions? Taxpayers and users of these public resources deserve to know where their lawmakers’ affiliation rests.

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