As previously reported, the Department of Labor (DOL) recently introduced a proposal that we believe will not adequately address the flaws in the current Davis-Bacon Act (the Act) wage determination process and has the potential to impact the already exacerbated labor environment. Because the Act is critical to ensuring construction and development affordability, NMHC recently took action by weighing in with the DOL.
Our Recent Actions
On May 17, NMHC along with ten trade associations submitted a comment letter to the DOL. Our comments come in response to the first attempt— in over forty years—by the DOL’s Wage and Hour Division (WHD) to update the Davis-Bacon wage process. NMHC worked with the Mortgage Banker Association to draft the industry response, which provided highly critical comments and the following recommendations:
- Recommend a change in policy to use a single residential wage for all residential projects.
- Recommend an increase to the threshold work is sufficiently “substantial” to warrant consideration of separate wage rates from $2.5 million to $15 million.
- Revise the proposed regulation to effectively lock down the wage rates to those in effect on the date an application for a firm commitment is submitted.
- Recommend to permit FHA-assisted structures of more than four stories to be considered residential construction, consistent with advances in the construction that have occurred since 1985, as reflected in the International Building Code.
- Recommend that the WHD directly engage in a deeper examination of the process of determining prevailing wages with the objective of either broadening participation, utilizing other data sources such as other BLS data or even looking to private payroll processing providers.
Why We Took Action
The multifamily residential projects supported by federal programs such as FHA loans through the Department of Housing and Urban Development must use Davis-Bacon wages for their labor costs. The process for determining the wages have not been changed in nearly forty years and are fraught with many problems identified by the multifamily industry.
Why This is Critical to Our Industry
Federally supported programs, such as FHA insured loan programs for the construction or substantial rehabilitation of multifamily properties, require the use of Davis-Bacon wages. The overall process for the use of and the determination of Davis-Bacon wages have driven up costs for residential construction and often do not accurately reflect the true prevailing wages.
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