Rebuilding the Trades (Updated)

When Mayor Bill de Blasio formally unveiled his comprehensive affordable housing plan back in early May, the rattling and drilling of construction equipment in downtown Brooklyn nearly drowned out his voice.

While the clamor on this picturesque spring day was not actually coming from the site highlighted by the mayor in his remarks—250 Ashland Place, the future location of a residential tower, 50 percent of which will comprise affordable units— it nonetheless provided a fitting soundtrack for the announcement, a centerpiece of de Blasio’s agenda.

The broad strokes of the mayor’s plan had been public knowledge for some time—the administration’s aim would be to create or preserve 200,000 affordable units across the five boroughs within 10 years—but beyond some previously undisclosed details, part of what made the event noteworthy was which union leaders had come out to demonstrate their support for the new initiative.

Gary LaBarbera, the president of the Building and Construction Trades Council of Greater New York (BCTC), looked on stoically from a corner of one of the seated areas at the press conference, along with several other representatives from the various construction trades he represents. While LaBarbera’s involvement with 250 Ashland, a project being built largely by his members, was a mere footnote on this particular morning, the fact that his unions would be erecting the tower signifies a major milestone for the continuing viability of the trades he represents.

Ten years ago, it was almost inconceivable that the building trades would even be interested in working on a New York City affordable housing project. Affordable housing developers have found it difficult to justify paying union wages for construction of housing units at below market rate prices. As a result, the building trades have historically declined such projects in favor of higher-paying luxury residential buildings and commercial high-rises.

Mayor de Blasio alluded to this past dynamic in his prepared remarks. “We always look for every opportunity to work with union labor,” he said. “We also are trying to create affordable housing with real tight financial dynamics, and our job is to create it on an unprecedented level. So it really will take a lot of cooperation and creativity in that relationship, but I think we’ve signaled to the building trades that we want to maximize their involvement—Gary LaBarbera is here, and we appreciate his support— but we also know that we have to build these units, and we have to make the financial realities work.”

The shifting landscape of the construction industry has propelled labor leaders like LaBarbera to re-examine their old orthodoxies. In an era where some of the building trades have seen their membership erode and their influence wane, the sudden interest in the affordable housing market—spearheaded by the de Blasio administration—could help unions recapture some of the market share of new construction they have been losing to nonunion firms, who traditionally offer a cheaper alternative to commercial and residential developers eager to cut costs.

“The Building Trades in New York and other parts of the country have grown much more flexible in their attempts to regain market share,” said Ed Ott, former president of the New York City Central Labor Council. “One of the strengths of the building trades has traditionally been that they understood market share. But over the last quarter-century, every time there has been a boom in the construction industry, they have come out of it with less of the share. Things have to change. They have a grasp on that— and, yes, they are working to do things in new ways.”

The exact size of New York City’s various construction unions is notoriously difficult to determine. The federal government mandates that every labor organization file a financial report that includes information on the size of its membership, but experts say that the accuracy of these forms as it pertains to membership data is debatable, as many times the union official responsible for filling out the form claims a bigger boost in membership than the union has in fact attained. In order to ascertain an accurate portrait of the state of unionized construction in the city, it is thus preferable to take the estimates compiled by outside experts and weigh them against the figures provided by insiders like LaBarbera.

Whichever assessments one relies upon, one thing is indisputable: In plunging the nation’s economy to lows not seen in decades, the Great Recession contributed to a sharp downturn in construction spending and employment.

The New York Building Congress, a membership organization dedicated to promoting the real estate industry, found in its annual report for 2011 that construction spending in New York City had declined 20 percent from 2008 (when the financial sector began to collapse) to 2009. Over that time period the industry lost roughly 11,000 jobs, from a high of 136,000 in the third quarter of 2008 to 101,200 in the first quarter of 2011, when it bottomed out.

“Those formerly ubiquitous small- to medium-size projects, which fed the building boom, have virtually dried up, and a lot of hardworking men and women are now out of work as a result,” wrote Building Congress President Richard Anderson in the report.

That same year the flagging real estate industry finally began to show a pulse, although nonunion construction companies helped provide the reviving charge.

These nonunion firms, “open shops,” as they are commonly known within the industry, had largely cornered the market on constructing affordable housing, as well as smaller buildings and hotels previously of little interest to the trades. Now, however, they were beginning to make headway into segments of the business the building trades had formerly monopolized, especially low- to midrise residential developments.

The niche carved out by the open shops already marked a significant change in the industry. Twenty years earlier it was virtually unthinkable that a construction project—residential, commercial or otherwise—could break ground without the involvement of the building trades. Not only were there deep personal allegiances to unions among those in the real estate community, but unionized construction was—and remains—the fastest, most efficient way to build in New York City. Moreover, nonunion shops typically lack the sophistication to construct the type of major commercial high-rises the trades specialize in, and as a rule are less diligent in ensuring workplace safety.

Still, in recent years these facts have failed to dissuade developers from utilizing nonunion construction. Prominent examples include the Toll Brothers’ second Northside Piers tower in Williamsburg; Lightstone’s housing complex adjacent to the Gowanus Canal; and the City Point project in downtown Brooklyn, which is using partially nonunion labor. 

The decision of developers to hire open shops boils down to simple economics, experts say.

A 2011 study conducted by Julia Vitullo-Martin, a senior fellow at the Center for Urban Innovation at the Regional Planning Association (RPA), estimated that union development carries a 20 to 30 percent higher premium than nonunion work. When Vitullo-Martin compared union and nonunion costs for constructing 20,000-square-foot residential buildings in both Brooklyn and Manhattan, she found the price tag was notably less for the work if it were done nonunion. Using $750 per square foot as the average sale price for an apartment in Brooklyn, Vitullo-Martin determined that if a development company were to build a condominium nonunion in the borough, it would reap a profit of just under 30 percent, whereas if it employed unionized labor, the project would lose money. Comparable arithmetic holds for Manhattan, where Vitullo-Martin, assuming an average sale price of $1,000 per square foot for apartments in the borough, calculated that developers building nonunion would realize a profit of just under 22 percent; with union construction, they would just break even.

Louis Coletti, the president of the Building Trades Employers’ Association (BTEA), New York City’s biggest trade organization representing contractors, said that the price disparity tilted in nonunion labor’s favor notwithstanding, the big difference in today’s construction climate is that its present economic realities are forcing some of the trades to become less choosy about the projects they take on. In the past, he suggested, one might see contractors walk off jobs that employed nonunion labor, but with the rise of open shops, contractors have no choice but to accept a new normal.

“What we have happening in New York City is that those trades that have made changes to be competitive, if their contractors are awarded that work and it’s a nonunion job, they’re going to work, and that’s a huge change in the New York City construction market,” Coletti said. “Unless we find a way to continue making changes in those markets, the BTEA contractors will find ways to compete in those markets, because we have a responsibility to those employees, to those stockholders, to keep our businesses viable. We want to do that by building union for all trades. But make no mistake about it, that’s a direction that you’re going to see BTEA contractors taking in the future. There are continued discussions that go on about how to address this. I’m hopeful that all the trades make the appropriate adjustments that will lead us to increasing our market share.”

LaBarbera insists the encroachment of open shops is no greater threat to the trades than it has been in recent decades. While construction of smaller residential buildings and boutique hotels is an areas where nonunion builders have done well at the expense of union labor, this hardly represents a new trend, he notes, as over the last 20 to 25 years the trades have consistently struggled in securing contracts for such projects.

“We would venture to say that probably 75 percent of all construction activity in New York City is unionized, so to me that is a very, very strong market share, especially coming into this boom,” LaBarbera said. “Currently we have almost 100 percent employment across the board in the building trades, 130,000 unionized construction workers working in the city of New York.”

“I’m not denying there is a sector of the construction industry in New York City that is nonunion, that has existed for 40 or 50 years,” LaBarbera continued. “Fact of the matter is, when the tide rises, all boats rise with the tide. The construction market right now is so busy that there are more residential projects within this kind of bailiwick, smaller projects that are being built nonunion. Not that percentages have changed; it’s because there is more and more work.”

Ruth Milkman, a sociologist of labor and labor movements at the CUNY Graduate Center and academic director of the Joseph S. Murphy Institute for Worker Education and Labor Studies, publishes an annual “State of the Unions” for New York City, New York State and the United States. Her most recent reports show that compared with the nation as a whole, organized labor in New York City has begun to rebound from its recession lows, despite its continued erosion in some sectors. Based on data from the Current Population Survey, which is conducted by the U.S. Census Bureau, Milkman ascertained that 22.4 percent of all wage and salary workers in New York City were union members in 2012–13, nearly the same as in the prior year but considerably fewer than the prerecession figure of 24.6 percent. Losses over the past decade have mostly come from the private sector, where the building trades have historically been dominant.

Nonetheless, a number of the building trades unions reported increased membership between 2012 and 2013, Milkman told City & State, citing new data from her forthcoming 2014 “State of the Unions” report—specifically among iron workers, journeymen and allied trades, plumbers and pipe fitters, and carpenters.

“It’s a very bifurcated industry,” Milkman said. “Heavy commercial [construction] is still pretty highly unionized in many cases, smaller buildings less so. One thing we’ve seen is there has been a slight increase in union density in New York City and state in the last year. Commercial construction is one driver of that, but it’s hard to pin it down exactly. Density is affected by the economy in general.”

PLA Panacea?

The grim circumstances of the recession forced the building trades to compromise in the form of “project labor agreements” (PLAs), agreements that determine wages, benefits and other provisions—such as encouraging minority representation—which the construction unions, contractors and subcontractors negotiate in lieu of a collective bargaining agreement to ensure that an entire project remains union.

As the economy went south in 2009, BCTC struck deals on several PLAs for both private and public projects intended as temporary salves to the city’s suddenly unstable construction environment. For developers and builders, PLAs represented a positive step toward streamlining the convoluted organizational structure of some of the trades. As Vitullo-Martin wrote in RPA’s 2011 report, “Applied projectwide, these agreements take a first step toward consistency in the intricate assortment of pay arrangements, holidays, work rules, and other customs.”

Developers privately concede that the fragmented bargaining structure of the Building Trades (which encompasses 49 affiliated local unions) can not only make negotiations difficult at times, especially when some of the locals make demands not in sync with the rest of the trades; it also contributes to the high price tag and potential inefficiency of working with unionized labor.

“The PLAs have proved very successful for some developers,” Vitullo-Martin said. “PLAs aren’t cure-alls, but there is no cure-all in labor and construction issues—none. What a PLA can do is handle some of the more onerous work rules, which is what developers and builders really complain about more than the high cost of salaries and benefits.”

In her report, Vitullo-Martin notes that the various unions within the Building Trades have unpredictable availability, with no standardized workday and “various subgroups adhering to their own seemingly random assortment of holidays.” She pointed to the Economic Recovery PLA negotiated by the Building Trades and BTEA, which included a “Schedule B” of union concessions negotiated by each local affiliate.

“From the standpoint of the industry, the built-in inefficiencies come from the fact that each negotiation is separate; they’re done by separate trade associations, different subcontractor associations—there’s no coordinating or negotiating,” said one real estate developer who asked not to be named so as not to anger the Building Trades union. “If everyone has different policies, how can you build a building?”

Disputing the notion that the trades are fractured or factionalized, LaBarbera prefers instead to characterize them as “specialized.” Construction by its nature is a specialized industry, he says, and nuance often gets lost with the hiring of nonunion firms, which gravitate toward more industrialstrength, straightforward projects rather than buildings that require a lot of variation or intricate design. PLAs allow the trades to maintain their hold on such projects, he noted.

“We have been able, even in those types of buildings, to mitigate [cost] and get those buildings built using PLAs; that’s one of the things we have used as a tool for now to be more competitive,” LaBarbera said. “Once you start going up to larger construction or more complicated floors, more architectural buildings, that’s where the nonunions don’t have the skills or the capacity to do that.”

One PLA that has allowed LaBarbera and the Building Trades to stay competitive, while also achieving some cost savings, is the “Outer Borough” agreement covering residential development outside of Manhattan that LaBarbera helped negotiate in 2010, which required that each local affiliate provide the equivalent of a 20 percent reduction in payroll costs, taken from wages and benefits.

Still, LaBarbera and Coletti agree that PLAs are not a panacea in bridging the cost gap between union and nonunion construction but rather a temporary solution to keep construction projects in the pipeline.

“A PLA, in the interim, serves the purpose, for the most part, holistically, so we’ve been able to do that,” LaBarbera said. “Fundamentally, I don’t believe that PLAs should replace the collective bargaining process. I firmly believe as a trade unionist that collective bargaining should address the economics of the marketplace, and it should be done through the collective bargaining process between a local union and the multi-employer association.”

Recapturing the Market

When The Wall Street Journal reported in August that the Building Trades had forged a coalition with housing activists in an attempt to get a piece of the expected influx of affordable housing construction, many New York City labor experts were pleasantly surprised, for two reasons: because the Building Trades had never previously shown much interest in affordable housing construction; and because the coalition with housing activists continued a recent trend of the Building Trades working collaboratively with other organizations to help create leverage to get more work for their members.

The Journal reported that the unions would join housing activists in calling for 50 percent of all new housing units to be set aside for lower- and middle-income residents, while also offering to accept wages 40 percent lower than typical union pay on affordable housing projects, and fostering a new class of workers, drawn from local communities, to help construct the houses. The latter part of that agreement is what has many individuals in the labor and government spheres excited for the opportunity it could provide for people of color to gain some upward mobility within the Building Trades. Though they have been historically slow to integrate their membership, the trades have made great strides in this area in recent years, thanks in part to new apprenticeship programs. Black representation in union construction is higher than it has been in years (21.3 percent), and is comparable to black representation in the overall workforce (23.3 percent), according to an analysis conducted by the Economic Policy Institute, a nonpartisan think tank.

“What I think is interesting here is this actually does not seem to be an effort started by City Hall but an effort between community organizations who want more affordable housing, and those who build housing but want prevailing wages, to get together and say, ‘Do we have some good ideas between ourselves?’ ” said state Sen. Liz Krueger, herself a former housing advocate. “It’s a pretty big step for labor to say, ‘We’re willing to explore a lower wage rate for specific kinds of housing.’ I think the potential also for using internships and onthe-job training to help bring more people from the city and of color into construction labor in a unionized way would also be a fabulous win for the city.”

Not everyone is convinced the mayor’s approach will ultimately align with the priorities set by the coalition of housing activists and Building Trades. Immediately after de Blasio expressed his desire to work with labor at the announcement of his affordable housing plan, Alicia Glen, the deputy mayor for housing and economic development, equivocated on that very topic, saying, “Different kinds of folks are going to participate in that labor pool.”

“Too early to tell, but I’m not convinced [de Blasio] needs [the Building Trades],” said one prominent city real estate source, who declined to be named so as not to upset the mayor. “I think he wants them because Bill, he’s a tried and true believer in unions, but at the end of the day this is about economics. Bottom line is, if you try to force Building Trades costs into the construction of affordable housing, what you’re gonna get is no housing.”

The Building Trades’ newfound interest in affordable housing construction, LaBarbera explains, stems from a political sea change that came about with the end of the Bloomberg era and the dawn of the de Blasio administration, and capitalizes on the current opportunities available for growth.

“It’s really been a bit of a fight with prior administrations because the whole affordable housing world has become a handful of housing developers that got rich off the backs of low-wage workers, and that scenario can’t continue,” LaBarbera said. “We honestly believed that with this mayor that behavior wouldn’t continue. He’s a progressive mayor that we think we can actually have an opportunity to create a win-win outcome with. In the past we were really pushed out because the affordable housing industry became very, very closed. Only certain developers got certain [incentives]. … A lot of the financing deals were done [with developers] directly. There weren’t RFPs. We’ve been trying to expose all that in the past.”

Before the trades learn if de Blasio will live up to their high expectations for his mayoralty, LaBarbera will first have to convince his members—80 percent of whom he claims are already on board—to approve the new wage rate proposal. (LaBarbera does not need unanimous approval from his members to move forward.) Jack Kittle, the political director for the District Council 9 International Union of Painters and Allied Trades, has already expressed skepticism that top construction talent can be attracted at such a low rate. Ed Ott, the former Central Labor Council president, added that operating engineers, whom experts affirm are notoriously intransigent in making union concessions in project labor deals, would present another hurdle to the proposal’s adoption.

“Operating engineers have always been the most resistant to change, because in New York they had no reason to change; what they were doing was working for them. It’s a skill that’s not easy to replace,” Ott said. “They’re the institutional memory in the industry, so they’ve always felt like they don’t have to change. Hard to think that [the Building Trades] would try to do [the new wage rate] without everybody being in.”

One additional incentive for his members to support the affordable housing agreement is the opportunity for LaBarbera and the trades to beat the nonunion builders at their own game. LaBarbera dismissed the view that nonunion construction pulls from a different, more diverse talent pool than union shops, repeatedly insisting that nonunion shops “exploit” minority construction workers because of their unsafe conditions, inferior construction product and, most important, substandard wages. As evidence, he pointed to a recent Daily News report about a group of nonunion workers hired to build the Sugar Hill affordable housing development in Harlem who were paid far below the prevailing wage required on the project.

“We can essentially create a pipeline of work for this workforce at a rate lower than our current prevailing wage rate but higher than what they’re currently making now, so it creates more money for them, medical coverage for them. … There’s pension security, and they can ultimately become a journeyman worker all over the five boroughs,” LaBarbera said.

Coletti believes the Building Trades dipping their feet in the affordable housing pool, combined with union and nonunion shops working pretty much at capacity, could bring about a tipping point for the construction industry as a whole, for better or worse.

“The only thing that has really saved us has been the strength of the market,” Coletti said. “I’ve never seen the set of conditions that we have now, which is the market is so hot. The nonunion world is at their capacity; they can’t handle more work. So is the union market. We need people on both sides of the table. The next couple of years are going to be very, very interesting.”

Correction: An earlier version of this post incorrectly stated that Related hired a nonunion contractor to oversee construction of the Hudson Yards development in Manhattan. In fact, the entire project is being built union under a PLA.