Bill To Force Out-Of-State Modular Plants To Pay New York Wages Awaits Hochul's Signature

A bill waiting to be called to Gov. Kathy Hochul’s desk could make a lower-cost, alternative method of construction more expensive in New York.

Both houses of the New York State legislature passed a bill this summer that would mandate that construction and fabrication work done off-site for public work projects be compensated at New York’s prevailing wage rate — even if it happens in a different U.S. state.

The wage requirements will apply to any project that receives state tax dollars or support, from affordable housing to healthcare, school facilities and disaster relief work.

The legislation, Assembly Bill A2747A, has struck a nerve in the modular construction industry, which said it will add to the cost of their work — many of the modular fabrication plants that supply construction components to New York sites are based in other states with lower labor costs.

“What New York is trying to do is to say, ‘We're going to take these very old, traditional construction rules, workplace rules, and apply them in a modular factory,’” said Tom Hardiman, executive director of the Modular Building Institute. 

The bill was introduced by Assembly Member Harry Bronson, a Rochester Democrat who chairs the Labor Committee. His office didn't respond to Bisnow’s request for comment. Assembly Member Linda Rosenthal, who co-sponsored the bill, also didn't respond to a request for comment.

Once a bill passes both houses, the New York Senate waits for the governor’s request for the bill for signature. Once Hochul requests the bill, she will have 10 days to sign the bill into law, request amendments or veto it. 

The bill had not been delivered to the governor by press time, nor were there indications she had requested it. A spokesperson for Hochul told Bisnow that the governor will “thoroughly review all Bills once they head to her desk for signature.” The spokesperson didn't respond to questions about when the governor plans to request the bill.

Hardiman believes that the legislation is an attempt to stop out-of-state modular companies from underbidding local New York unions for work. But the bill's authors misunderstand how modular construction works, he said.

“Factories aren't set up like jobsites. They're more assembly lines. There are workers doing multiple tasks,” he said, adding that those can range from manual labor to computer programming.

The end result of the bill will be removing modular fabrication as a tool for commercial real estate developers hoping to build in New York, he said. Companies will struggle to understand how they can comply, and it will also push construction prices even higher in the nation's most expensive city for construction.

“This just adds another layer of regulations, complexity, costs on top of that, at a time where universally, everyone's saying, ‘We have housing problems, we have infrastructure needs, we think modular can play a bigger role,’” Hardiman said. 

The Building and Construction Trades Council of Greater New York, a labor union group, backs the bill as a way to ensure New York’s builders and contractors benefit from any taxpayer-funded construction.

“All hard-working tradesmen and tradeswomen should have the opportunity to support their families, reinvest in their communities, and pursue the middle class,” BCTC President Gary LaBarbera told Bisnow in a statement. “If projects are going to benefit from taxpayer funds, there lies a responsibility to pay fair wages across the board and for every contribution to making a concept reality.”

But affordable housing builders have come out against it, arguing it will create further complications for developers already struggling with high construction costs.

“Policies that can significantly raise residential development costs should always be nonstarters,” Jolie Milstein, president of the New York State Association for Affordable Housing, wrote in a June op-ed about the bill for upstate New York newspaper the Democrat & Chronicle. “Especially when it will disproportionately impact the very projects designed to help low-income and working-class New Yorkers.”

The bill would essentially remove an option that developers sometimes tap to keep project costs lower, said Spencer Levine, president of luxury residential developer RAL Cos. 

“Obviously, cost is important as a tracker in every aspect of construction development,” he said. “But just as important is the availability of and diversity of places where I can get my components from. And I do think this could potentially limit that pool of available sources."