California lawmakers are on the cusp of striking a last-minute deal to tie one of the year’s most ambitious and controversial housing bills to a new set of minimum wages for housing construction workers — a proposal that has thrown a wrench into budget negotiations just days before the deadline.

The new legislative language, buried in a sprawling budget bill put into print on Tuesday, represents a grand political bargain between pro-development advocates and the state’s carpenters union. Supporters say the new arrangement could reshape the way that future California housing legislation is written and negotiated.

There is intense opposition from other building trades unions, which are among the most powerful interest groups at the state Capitol and whose leaders argue that the bill would undercut hard-fought pay standards. That’s made for a high-stakes showdown as Gov. Gavin Newsom demands major changes to streamline housing construction as part of the budget.

The new wage rates are a major pivot in a debate that has dominated the legislative politics of housing in California for at least a decade. Past bills aimed at making it easier to build new homes have offered a trade: Ease regulations on approvals, permits and environmental regulations in exchange for, among other things, higher guaranteed pay for construction workers. The standard wage rate in those debates have been the “prevailing wages” — state-determined wages that vary by occupation and location that generally work out to what unionized workers earn.

These new proposed rates are significantly lower and are designed to serve as a more development-friendly alternative. They would apply only in cases where developers opt to use a new proposed exception to California’s premier environmental impact law, the California Environmental Quality Act. The vast majority of those projects, small-scale residential construction projects, are not currently covered by prevailing wage.

That’s why supporters of the deal are arguing that the new standards represent a wage increase.

Residential construction is “a virtually non-union industry,” said Danny Curtin, who heads the California Conference of Carpenters. “You have the ability to give those people a substantial — a modest, but substantial and important — raise.”

Even so, the pushback from other construction labor groups has been fierce.

The State Building and Construction Trades Council, a construction union umbrella group that regularly clashes with the carpenters union on labor issues, excoriated the proposal in a letter to legislative leadership yesterday.

“This proposal is a wage grab of construction workers’ wages disguised in an ‘affordable housing bill,’” the letter by council president Chris Hannan said. “We urge you to abandon any pursuit of this harmful and unprecedented proposal, which would devastate construction workers.”

Lawmakers also appeared caught off guard by the proposal at an Assembly budget hearing on Wednesday packed with union advocates.

“I didn’t come to Sacramento to cut people’s wages,” said Assemblymember Chris Rogers, a Ukiah Democrat. “I didn’t sit through months of budget committee hearings talking about how to preserve our social safety net to then, at the 11th hour, potentially kick more people onto it.”

Assemblymember Lashae Sharp Collins, a Democrat from La Mesa, called the fact that the building trades reportedly weren’t consulted “appalling.”

The new wage proposal received a similarly icy reception from many Democrats in the Senate, which also held a budget hearing on Wednesday.

“You’re presenting something at the last minute, I don’t know who you consulted with, and you reached this conclusion to completely change the structure for the way that workers in the construction industry would be paid,” said Sen. Maria Elena Durazo, a Los Angeles Democrat and a reliable ally of the trades.

The bill was scheduled to be voted on Friday. In the face of furious pushback a budget committee hearing vote in the Senate was delayed on Wednesday, making the timing of its final vote uncertain.

Though the last-minute addition of contentious labor language threatens to divide legislative Democrats, the party holds two-thirds of the seats in both legislative chambers, giving the budget bill ample opportunities to pass even with significant defections.

A debate months in the making

This new proposal is the latest addition to a policy idea introduced in March by Oakland Democratic Assemblymember Buffy Wicks. The bill would exempt most new apartment buildings in urban areas from CEQA, the environmental law.

The 55-year-old law is the frequent target of lawmakers and pro-housing advocates who argue that it can be weaponized to slow or impede desperately needed new housing and other projects. Many environmental advocacy groups and organized labor groups defend the law as an important check on unwanted or environmentally harmful development.

Wicks’ idea got a helpful boost last month when Newsom opted to fold it into his proposed budget for the coming year, putting it on a speedier and surer path to becoming law. He has since threatened to withhold his signature from the budget if legislators do not approve the sweeping housing measures, some of which are still being negotiated.

A key part of that budget package — what’s called a trailer bill — is before the Legislature now. The bill includes Wicks’ exemption tied to the new labor language, along with key components of other housing bills, including a proposed freeze on building code changes, limits on the fees that landlords can charge tenants and an expanded tax credits for renters.

Assemblymember Nick Schultz, the Burbank Democrat who authored the building code freeze bill, noted that he wasn’t informed by the governor’s office or Assembly leadership that his proposal was being tucked into the budget bill. He said he found out from an advocacy group.

By setting wages far below the “prevailing wage” rates required by law for publicly funded projects — and frequently demanded by construction unions for their support for housing bills — it is meant to offer a more financially feasible alternative, while still boosting the pay of workers at the lowest end of the labor market.

In Oakland, for example, a carpenter making the state-set “prevailing wage” for a residential project earns at least $99 per hour including benefits.

The new minimum wages would only require that the majority of construction workers across the Bay Area covered under the policy be paid at least $40 an hour. Less skilled or experienced workers would require at least $27 per hour. Smaller housing projects of 25 units or fewer would be exempt entirely.

The budget bill also includes language that would give unions the right to take contractors to court for workers compensation, insurance and payroll tax violations.

“Yes in my backyard” advocates that have historically looked askance at prevailing wage requirements are celebrating the new deal.

“This is one of the biggest wins for housing in a generation,” California YIMBY president Brian Hanlon said in a statement. “Building infill housing is not a threat to the environment — it’s how we save it.”

Carpenters and YIMBYs collaborate again

Though new wage rates only apply to Wicks’ urban infill exemption, hammering out a deal with a major labor group allowing for pay significantly below prevailing wage would spell a significant shift in California labor policy.

This isn’t the first time the state’s carpenters union has cut a high-profile deal to push a major YIMBY-backed housing bill across the legislative finish line.

In 2022, Wicks’ bill to fast-track apartment construction along stripmall corridors earned the endorsement of the carpenters after she added a prevailing wage requirement, along with some other benefits.

At the time that was considered a political concession. For years the state’s other major construction worker union group, the Trades Council, had made the inclusion of so-called skilled-and-trained standards — essentially, a requirement to hire predominantly unionized workers — the price of their support for housing bills.

Learn more about legislators mentioned in this story.

María Elena Durazo

Democrat, State Senate, District 26 (Los Angeles)

Chris Rogers

Democrat, State Assembly, District 2 (Ukiah)

Buffy Wicks

Democrat, State Assembly, District 14 (Oakland)

Nick Schultz

Democrat, State Assembly, District 44 (Burbank)

LaShae Sharp-Collins

Democrat, State Assembly, District 79 (La Mesa)

In breaking with the trades, the carpenters have long argued that clearing the way for the construction of more housing, even at the expense of higher mandatory wages, represents an “organizing opportunity” for the union.

After Wicks’ bill passed over the Trades Council’s strenuous objection, other pro-development lawmakers came to see that deal as something they could effectively copy and paste into their housing legislation, all but guaranteeing the support of an unlikely coalition of developers, union workers and YIMBY activists.

Even so, many developers continue to argue that prevailing wage rates are still too costly to make construction pencil out beyond the state’s priciest metro areas, making those prior housing bills ineffective at actually producing more housing.

Supporters of this new deal say the lower wage standard could be the next go-to legislative language for future housing bills.

“This bill is a big step forward and an important test of whether the ‘YIMBY-Carpenter alliance’ can enact housing bills that generate housing production at scale,” UC Davis law professor Chris Elmendorf wrote on X.

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Alexei Koseff contributed reporting to this story. This story was originally published by CalMatters. Sign up for their newsletters.