Wage Theft, Tax Evasion And A Labor Shortage: Are Unlawful Contractors Compounding The Housing Crisis?

The affordable housing crisis in the United States has been at a breaking point for years now, and the coronavirus pandemic is expected to exacerbate the problem.

The country is short 7.2 million affordable housing units, and one of the biggest forces standing in the way of their construction is the industry’s labor shortage. If contractors want to solve this issue and get the affordable housing market back on track, though, it may be time to hold themselves accountable. 

“Right now, we’re seeing a ‘Wild West’ type of environment on some housing sites, from unlawful labor practices to inexperienced workers being paid low wages,” said David Kersh, executive director of the Carpenters/Contractors Cooperation Committee, known as Quad C. “This won’t lead to more affordable housing, it will just lead to a greater need for it.” 

Quad C is a nonprofit organization that was founded more than 30 years ago to work with local, state and federal civil and criminal law enforcement agencies to crack down on unlawful business practices in the construction industry. 

The group’s goal, according to Kersh, is to promote compliance and ensure that responsible contractors and workers are hired for projects. Bisnow spoke with Kersh to learn more about the construction labor shortage, how it’s impacting affordable housing and what Quad C is doing to help.  

Bisnow: How has the construction workforce changed over the past few years? 

Kersh: The construction workforce is aging, and currently there are not enough skilled workers who are able to replace them. That’s the first issue. The second major trend I’m seeing is that there has been a rise in residential projects and that has led to two types of construction jobs: public works projects with public money and prevailing wage laws and apprenticeship standards, and certain residential projects that are attracting unlawful business practices. 

There is so much pressure to get multifamily projects done fast that it can lead to the use of unscrupulous practices: cash pay, tax evasion, workers’ comp violations. This means on one side of the street, you can have workers building a subway station making good pay and on the other side, a transit-oriented mixed-use project going up using poor labor practices and unskilled workers. 

Bisnow: What are some of the challenges standing in the way of hiring skilled laborers to meet the demand? 

Kersh: I feel like the industry as a whole is struggling with a bit of a public relations issue.

Some contractors are known for cutting corners and not enabling skilled workers to be paid fairly and achieve their potential. Why would you want to go into an industry where you look around and all you see is wage theft? 

In high schools, construction is looked upon as a dirty, difficult job. In reality, the industry should be reaching out to schools and working with them to show students that these are good jobs where you can be proud of what you’re building, get paid well and avoid the debt that can come with college. 

Bisnow: How does all this impact the development of affordable housing? 

Kersh: There are a lot of regulatory issues surrounding the development of affordable housing, and we’re working at the local and state level to make changes that incentivize the creation of this housing. 

Right now, however, it’s not uncommon for this type of housing to be built using the cheapest possible labor and without adequate training standards to promote the next generation of skilled workers. We need to change that and push for more skilled and trained provisions at the same time that we streamline building more affordable housing.

If you’re not paying workers adequate wages to live, you’re practically perpetuating the problem and increasing the need for more affordable housing. Unless you have high standards on these projects, all you’re doing is creating more people who will need affordable housing.  

Bisnow: How is the CCCC working to address these issues? 

Kersh: Traditionally, we have operated as a watchdog group that does field compliance activity where we work with government agencies to police the industry — to go out and speak with workers and crack down on contractors who are breaking the law.  

Now, we’ve branched out because we’ve realized that’s one part of the problem, but we need to help on the policy level to first implement better laws that crack down on contractors who commit fraud, cheat workers and cut corners and second, be a part of pushing forward better affordable housing development. We want to use our industry expertise to help streamline how affordable housing is developed, to help with the entitlement process, planning and other issues so developers can cut costs by saving time, not by making sacrifices when it comes to laborers.

The goal is to change the whole industry climate. This way, more affordable housing can be developed, more honest, hardworking contractors will get contracts and workers will get treated fairly. 

This article was produced in collaboration between the Carpenters/Contractors Cooperation Committee and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to [email protected].