Boston’s building unions offer deal on housing costs

By Tim Logan 

GLOBE STAFF  

MARCH 06, 2016

Boston’s construction unions are offering to help lower the pricey cost of building housing in the region by working for substantially lower rates on certain projects, a move that could result in new apartments renting for hundreds of dollars less a month.

After two years of talks, building trades unions, which include plumbers, painters, and electrical workers, are set to roll out separate units that will specialize in apartment construction. Those workers would be paid about one-third less than the unions’ standard commercial rates — $40 an hour in wages and benefits for a painter, for example, instead of $60, in exchange for the jobs being 100 percent union.

“We need more housing in this region,” said Brian Doherty, head of the Metropolitan Building Trades Council, who helped craft the lower wage structure. He said last week that all the trades working on apartment buildings have now agreed to the plan.

“There’s a big challenge in front of us and we want to be part of the solution,” he said.

A similar model was adopted two decades ago by the region’s carpenters union, which operates independently of the building trades council and typically provides about 40 percent of the labor in a midsize apartment building. The new deal would cover the full gamut of construction and could reduce the cost of building an apartment unit by tens of thousands of dollars.

With its expensive land, thorny permitting process, and high wages, Boston has some of the highest development costs in the country. The average 1,000-square-foot apartment in a five- or six-story building in the city costs nearly $400,000 to develop, industry experts say. That locks new construction in to rents most Bostonians can’t afford.

If the effort works, it could be a breakthrough in Mayor Martin J. Walsh’s two-year effort to build more housing that middle-income residents can afford. Early in his administration, Walsh identified lower labor rates as key to his broader strategy to add 53,000 units of housing in Boston by 2030.

“I would love to see results on this,” Walsh said in an interview. “It’s getting close now.”

Walsh himself led the building trades unions before taking office, and he met with union leaders several times over the last two years to prod them on the new wage rates. His housing chief, Sheila Dillon, has been negotiating with Doherty for months.

“If we’re going to build the amount of middle-income housing this city needs, we’re going to have to make this work,” Dillon said.

Doherty said the lower rates would probably apply on new buildings aimed at lower and middle-income residents and on market-rate projects in neighborhoods such as Dorchester and East Boston. Those buildings would typically hold anywhere from 50 units to 200 or so units.

Importantly it would not be limited to Boston, as Doherty said the unions will also offer the lower-wage package in outer neighborhoods of Cambridge, Somerville, and nearby suburbs where housing can’t fetch top-dollar rents.

Doherty said the unions are looking for a few projects to test the lower-wage package and hopes to have deals in place soon. The talks have involved the head of one of the region’s biggest construction firms, John Moriarty, who said knocking $25,000 off the cost of a unit could potentially lower its rent by about $250 a month.

“We’re almost there. I’m dying to get the right-sized job to try this on,” Moriarty said. “Once we get confidence in the market that people and big lenders can count on this, then we’ll be on the road.”

Others in the development community are more skeptical.

Privately, many builders grumble about the high costs of union labor in Boston. But they’re loath to say so publicly for fear of alienating unions and their friends in City Hall. Anything that lowers those costs would be welcome, said David Begelfer, chief executive at commercial real estate trade group NAIOP Massachusetts. But he doubted that the proposed wage concession would be enough to affect rents.

“I’m happy they’re talking about it, but I find it hard to believe that a new rate is going to make an enormous impact on prices,” he said. “I just don’t think that’s going to be the solution.”

Even at lower wages, Boston will still be an expensive place to build. Land costs, for example, have climbed 40 percent since the mid-2000s, according to a recent report from the Boston Foundation, and the process to permit a project can take years.

For unions, the wage package is also a way to compete for more work. While many of the larger housing projects in Boston are built by union labor, lower-cost nonunion construction is more common in the suburbs. In those markets, many builders don’t even consider using unions, said Harry Brett, business manager for the Plumbers and Gasfitters Local 12.

“In a lot of cases our contractors don’t even really get invited to bid on the work. Maybe there’s a presumption that we’re not affordable,” he said. “We’re making an effort to get into that market.”

This could help unions expand their ranks. Some of the locals, Doherty said, have launched campaigns to organize workers at nonunion construction companies, offering better wages, benefits, and union help in a slice of the industry where they say workers often lack protections.

“We want to standardize the residential construction industry in this region,” Doherty said. “We’d like to inject a little fairness into this market for workers.”

A model exists in the New England Regional Council of Carpenters, which operates separately from the Building Trades Council. About 20 years ago it launched a separate local that charges a third less to build apartments. It has been one of the union’s fastest-growing locals, said Mark Erlich, the carpenters’ executive secretary.

“Demand for that work is increasing,” he said. “And we’re typically on the vast majority of wood-frame projects that go on in metro Boston.”