Los Angeles City Council is weighing a proposal to study the impact of a minimum wage specifically for construction workers on mid-sized residential developments. The proposed benchmark under discussion would set a wage of $32.35 per hour, plus $7.65 per hour in health credits, for projects of 10 or more units and up to 85 feet in height. While the council is not yet enacting a wage increase, the study could shape the future of construction costs.
Why the Study Matters
Currently, median wages for construction workers in Los Angeles hover around $18 per hour, often without benefits. City officials point out that nearly 500,000 new homes will need to be built by 2029 to meet state housing mandates, and achieving that goal is already a steep challenge. Proponents of the study argue that higher wages could attract more skilled labor and stabilize the workforce. On the other hand, critics warn that increased labor costs could slow development and raise housing prices.
The proposed minimum wage would apply only to new residential developments of 10 units or more, excluding projects already covered by labor agreements or union contracts. This exemption introduces a potential strategic advantage for developers who work with unionized crews, while non-union projects may face higher cost pressures if the policy moves forward.
What the Study Will Evaluate
If the council approves the motion, the city’s legislative analyst will examine the feasibility of such a wage, assessing its potential impact on project timelines, construction costs, and housing affordability. The study will also explore whether increased wages could create unintended consequences, such as delayed projects or reduced unit counts.
It’s important to note that the $32.35 figure is not final—the study could recommend a different rate, either higher or lower, and may influence how future construction projects are budgeted.
Implications for Multi-Family Investors
For investors, the proposed wage study signals that labor costs could become a significant factor in development economics. Projects in the planning or approval stages may need to adjust underwriting assumptions to account for potential wage increases. Developers may also consider early engagement with unionized contractors to secure potential exemptions or mitigate risk.
Additionally, any change in labor costs could affect project timelines, unit counts, and overall return on investment. Incorporating a labor-cost contingency into financial models now can help maintain margins and avoid surprises as policies evolve.
Investor Takeaway
While the council’s motion is just a study, not a wage mandate, it underscores the growing importance of labor strategy in Los Angeles multi-family development. Investors should:
- Monitor council votes and policy updates closely
- Stress-test project budgets for potential wage increases
- Consider strategic use of unionized labor for cost advantages
- Build timeline and cost contingencies into project plans
By taking a proactive approach today, investors can safeguard margins and position projects for success in a city where construction costs and labor policies are increasingly in flux.
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