Pressured by Carpenters:
Cheap Labor Caved UFT's Housing Plan

By MEREDITH KOLODNER

Last week's controversy that led the United Federation of Teachers to back away from financially supporting an affordable-hosing project after the Carpenters' union objected put into high relief an issue lurking behind the façade of every new building: the growing demand for such housing even as many developers say they can build it only by using cheaper, non-union labor.

RANDI WEINGARTEN: Says she was deceived.

The deal to use the Teachers' pension money to produce housing reserved for educators collapsed in spectacular fashion after the developer's refusal to pay prevailing wages became public.

Breaks for Developer

Atlantic Development Corporation has a reputation in housing advocacy circles as frequently seeking to avoid using union labor. To this point, the company has refused to agree to use union workers or pay the prevailing wage for various construction jobs at the Bronx development even though it bought the 41-lot site from the city for $1 per lot. It will also be exempt from real-estate taxes for 25 years for part of the land.

In addition to the residential units, the 4.5-acre site will include a 120,000-square-foot private college campus, 40,000 square feet of retail space and an underground parking lot.

While other public-sector unions have expressed interest in investing pension funds in affordable housing built for members, they will likely face a similar tangle of developer-driven profit mandates and building trades seeking to hold on to union wages and benefits on job sites.

AFL-CIO New York City Central Labor Council Executive Director Ed Ott argued that there should be no conflict between using union labor and building affordable housing.

'It Can Be Done'

"It's absolutely possible, and there's actually no reason why it couldn't have been done all along," he said "Workers in this city should not have to subsidize housing with inferior wages and standards."

NOT 'AFFORDABLE' ON WORKERS' BACKS: Ed Ott contends that using union labor - at the accompanying wages - to build affordable housing is not an incompatible coupling, and that the project from which the United Federation of Teachers just withdrew its participation is the first round in what he hopes will be an ongoing discussion. 'Workers in this city should not have to subsidize housing with inferior wages and standards,' he said.

The Carpenters, the Teachers, the City Comptroller's Office, which brokered the deal, and the developer were all involved in talks last week to see if a solution could be found. But if not, the Teachers Retirement System will divest and sell the $28-million worth of bonds to another investor. The move will not endanger the project, since the money has already been committed and cannot be withdrawn. But if a deal is not reached, it is likely that Teachers will no longer be given preference for the 234 units that were being financed by their pension system's funds.

In some affordable housing projects, and especially in boroughs other than Manhattan, building trades have set "market-recovery" rates, which is a lower pay rate that can run as much as 30-percent cheaper in total costs. In the case of Atlantic's Bronx development, the Carpenters have been trying to get the company to look at bids from contractors using union labor at the lower rate.

Offered a Discount

"We're not advocating this has to be done at prevailing wage," said Elly Spicer, the field representative for the local Carpenters Labor Management Corporation. "We have been willing to step up and take into account the lower return on affordable housing."

She noted that the Carpenters supported the construction of affordable housing both because of the housing crisis in the city and because many of their own members needed it.

Atlantic declined to comment on why it was refusing to pay the prevailing wage, which is almost always higher than what non-union contractors pay their employees, since it represents an average of what is being paid in the industry for particular trades.

UFT: We Were Misled

The UFT claimed that it had been misinformed about the terms of the project.

"The Union supported the project on the condition, among other things, that it would be built using prevailing wage rates," Ms. Weingarten wrote in a Dec. 3 letter to the TRS trustees.

The union president said she was officially informed that prevailing wage was not part of the agreement on Nov. 28. Thus began a five-day scramble to re-negotiate the deal, culminating with a threatened protest by Carpenters in front of UFT headquarters during a 50th-birthday celebration for Ms. Weingarten Dec. 4. The confrontation was averted when the Teachers' union leader announced TRS's intention to sell the bonds and appeared at a protest against the developer that morning at the building site.

Officials at the Housing Development Corporation, the government body overseeing the financing, said they were still hopeful that the project would go forward. "If there was a misunderstanding, we'd be happy to talk about that with the UFT," said an HDC spokesman.

Much of the affordable housing built recently in the city using prevailing wages has involved massive projects known as 80-20s, which have 80 percent market-rate housing and 20-percent regulated. Other projects have relied on Federal funding, which requires the use of the prevailing wage under certain conditions.

The logic for the requirement, laid out in the 1931 Davis-Bacon Act, was that while the government should buy services from the lowest bidder, it also should not act as a force driving down wages.

But there is no such regulation for state or city funding. "Labor never managed to push a law through to bring state law in line with Federal law," said Moshe Adler, the director of Public Interest Economics. "It's public land. The public loses the difference between market value and the price paid by the developer. That's a subsidy."

AFL-CIO's Involvement

The AFL-CIO Housing Investment Trust also invests pension funds in real estate projects. It must guarantee a decent return on the investment, and it mandates the use of union labor. In New York City, its housing projects have been confined mostly to re-financing Mitchell Lama housing, which was scheduled to phase out of rent regulation, to keep it affordable for the tenants. New construction projects, because of the high cost of land and pressure to keep wages low, have been more difficult for the fund to invest in. Lending in the city for real estate construction projects is also competitive since they have been highly profitable in recent years.

From the late 1940s through the late 1960s, thousands of affordable housing units were built using union funds and union labor. The United Housing Foundation sponsored ongoing housing projects and built some 40,000 units, at an average of 3 occupants per unit, according to labor historian Josh Freeman. Projects included Penn South and East River Houses in Manhattan and the Amalgamated Housing Cooperative in The Bronx. "In an era when construction work was so heavily unionized, it didn't come up much," he said.

But the ill-fated TRS project fell into the widening breach of non-union construction projects, which the building trades have been fighting for the past two decades. That fight has become more heated in the last year as the Bloomberg administration sought to build thousands of affordable housing units.

Leaving It to Market

"What is driving this is a different ideology," said Mr. Ott. "Now, the government has just completely left everything to the market."

Several union officials said last week that although the dust-up was messy, and publicly displayed some of labor's dirty laundry, the result was to put the issue squarely on the table.

"Somebody had to go up first; it happened to be the Teachers," said the CLC leader. "Now there's a real conversation going forward, a much sharper conversation. I'm looking forward to it."