L+M in deal with union laborers to cut wages on affordable projects

Moelis calls for more “trust-building” as he comes to terms with Local 79

L+M Development Partners' Ron Moelis and a rendering of Sendero Verdo (Photos via L+M; Handel Architects)
L+M Development Partners' Ron Moelis and a rendering of Sendero Verdo (Photos via L+M; Handel Architects)

Roughly two years ago, developer Ron Moelis was late to a fundraiser for then-New York attorney general candidate Letitia James. His timing would prove fortuitous: He was approached by an organizer for a construction union that had historically attacked his company for using nonunion labor.

Their conversation would lead to an agreement to hire the union on at least four affordable housing projects — at a substantially lower rate than on its typical jobs.

Laborers union Local 79 and L+M on Thursday announced the deal, which includes a 35 percent wage cut for the unions’ members. It also shifts the ratio of workers on those jobs in favor of those with lower pay grades, a tactic adopted by other trades in recent years to compete with nonunion labor.

For the trade union, the deal brings its members work they would not otherwise get.

A decade ago, the laborers started seeing their share of work in the residential market plummet. The union introduced a reduced wage rate schedule in 2017 for market-rate residential work — “We stepped up to stop the bleeding on the high-rise market-rate residential,” said Chaz Rynkiewicz, organizing director for Local 79 — and later to a smattering of projects with some affordable housing.

But until the deal with L+M, the union had not worked a 100 percent affordable project at the reduced wages. It is a sector in which the union has struggled to win market share. Rynkiewicz said the union hopes to reach similar agreements with other affordable housing developers.

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The agreement covers 3,182 apartments to be built in Harlem, the South Bronx and East New York. The Wall Street Journal first reported the deal’s wage cuts.

Typically, a Local 79 job would pair three journeymen, who are usually the most experienced and highest paid workers of a trade, with one apprentice. The average hourly wage for those three workers was $63 per hour. Under the deal with L+M, one journeyman will be paired with two less-experienced laborers and one apprentice, with an average rate for the four positions of $40 an hour.

Rynkiewicz said the union’s members are well aware of the need to find new ways to compete.

“When the time came to do what we had to do, our members understood,” he said.

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Such wage arrangements, though increasingly common, have proven controversial among some rank-and-file union members. Such was the case when the New York City District Council of Carpenters inked a five-year deal that set new wage rates and worker ratios for wall and ceiling workers.

At the time, representatives for one of the carpenters’ subsidiary groups called the agreement a “death blow.” But construction unions have increasingly turned to such options as a way to guard their dwindling market share.

Developers have also shifted tactics. They are more often negotiating with individual trades rather than sign blanket commitments to use all union labor.

In March 2019, Related Companies and the Building and Construction Trades Council — an umbrella group of construction unions — ended a long feud over Related’s use of nonunion labor. But the truce allowed the developer to continue what it had already been doing: Negotiating with the trades without committing to hiring only union workers.

Louis Coletti, CEO of the Building Trades Employers Association, a contractors group, said deals with individual unions don’t necessarily mean more sweeping commitments are gone forever.

“The first option is always to try to engage all the trades in this kind of discussion,” he said.
“That’s the preferable option. But I also think that many of the labor leaders are pretty good business leaders and their responsibility is to their individual membership.”

Moelis said he was initially wary when the laborers union’s organizer, Justice Favor, approached him at James’ fundraiser, given the developer’s previous run-ins with Local 79. But he found that he and the union shared a commitment to diversity and hiring within the communities they are building.

On their first project with L+M — the first phase of Sendero Verde, a 361-unit affordable housing project being developed with Jonathan Rose Companies and Acacia Network — L+M has agreed to hire 50 of the workers who live within the local community district.

Additionally, 20 percent of the hours worked on the project site must be by formerly incarcerated and/or at-risk youth, men and women, according to union representatives. Ten percent of the hours must be worked by women. The developer will also hire public housing residents living nearby.

Moelis said more such agreements with trades are possible, though deals are not one-size-fits-all. Some trades are more flexible than others. Such arrangements also take a significant amount of time to complete.

“There was a lot of trust-building that needs to be done. There’s a lot of concern and fear,” Moelis said. “It was hard to do. But I think it is possible to do, in particular with trades that are aligned especially on the side of growing their membership, diversifying their membership, and engaging in community activism.”

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