Developers say St. Louis’ rules will halt affordable housing

Affordable housing developers are speaking out, saying that rules passed by the City of St. Louis one year ago are making it almost impossible for them to build new housing.

The culprit, Board Bill 155, was backed by labor unions and won unanimous passage at the Board of Aldermen last February. It requires that multi-family, commercial, and mixed-used projects worth $400,000 or more and receiving tax incentives from the city must meet certain requirements, including having 20 percent of work done by apprenticeship programs and 25 percent by women- and minority-owned contractors. All of that adds complexity and cost.

But the biggest problem for these developers is the requirements around prevailing wages. Affordable housing developers are used to paying the federal prevailing wage. “We all know that drill,” says Mike Duffy, executive vice president of Roanoke Construction. “We know how to comply.”

The city, however, is requiring that developers pay the state prevailing wage—a much higher hourly fee, and one that four developers who spoke with SLM say is likely to doom most future affordable housing projects in the city.

The problem, the developers say, is that the state prevailing wage for each trade specialty is calculated based on the kind of work the state pays for—which tends to be massive projects like highways or prisons, not four-unit townhomes. Eric McMahon is the owner of Select Development, which has three affordable housing developments now underway. He says, “I have to pay, say, a carpenter on the renovation of a small apartment complex the same rate that the state of Missouri pays a carpenter to build a bridge.” That adds to the bottom line. 

And raising rent to balance things out isn’t an option. Almost all of these developments are dependent on the state’s Low Income Housing Tax Credits, which are issued competitively. Let the rent creep too high, and not only do tenants suffer, but the project won’t get picked when other jurisdictions can offer the same housing more cheaply. 

Couple that with other requirements by the city, and a compliance arm that seems to be enforcing endlessly shifting rules, and the developers have grown frustrated. Says Sean Spencer, executive director of the Tower Grove Community Development Corporation, “What we did was we created more layers of complexity and costs onto developers’ plates to do projects that didn’t pencil out before, and they especially don’t pencil now.” 

Adds Colleen Hafner, executive director of Rise Community Development, “Affordability is a necessity and a constraint when it comes to juggling increasing costs—something’s got to give. We are committed to paying fair wages for workers. The state prevailing wage wasn’t meant for affordable housing development.”

The developers sought a meeting to discuss their concerns with Aldermanic President Megan Green. She says the city had been unaware of the ramifications of requiring the state prevailing wage standards instead of the federal ones, but is now potentially willing to revisit the legislation that has caused so many problems. “We’re kind of in the early stages of looking at that,” she says. 

She says she’s learned that the county was able to forge a compromise on prevailing wages on similar legislation (although that bill was ultimately vetoed by County Executive Sam Page for unrelated reasons). “We want to see if that’s something that we may be able to implement here, because I think everybody wants the same thing,” she says. “They want affordable housing, and they also want to make sure that workers are paid living wages. So it’s really about finding that balance.” 

Jeff Smith, executive director of the Missouri Workforce Housing Association, says that the county legislation would have required federal prevailing wages for affordable housing, not the more expensive state standard currently in use in the city. “I appreciate area union leaders’ work alongside us to craft a prevailing wage compromise that will help produce affordable housing in St. Louis County,” he says, “and I’m pleased some of those leaders have told me they would be amenable to similar language regarding City affordable housing construction.”

Adds Green, “Knowing that in St. Louis County they did find a path forward gives me some optimism that we may be able to find a path forward here.” 

Alderman Bret Narayan, however, isn’t so sure. He was the sponsor of Board Bill 155, which he notes was built on a law passed by aldermen in 2020 that required the state prevailing wage for projects worth at least $1 million (although he acknowledges that requirement, in addition to coming with a much higher threshold, was largely ignored by developers). 

He says the affordable housing developers haven’t come to him—and that at the time of his bill’s passage, it was merely presented as a hypothetical; they did not hear directly from developers actually building affordable housing. Of their concerns now, he says, “That’s a tough one, because on the one side, you do have affordable housing. On the flip side, I think that you need to pay workers, particularly if you’re going to be essentially taking money from school children to develop things.” 

He’s reluctant to undo what he sees as a good piece of legislation forged in compromise. “I’m always open to a discussion, and there are ways to get one-off projects through,” he says. “But I think to get in and start tinkering with something that we just had basically every interested party at the table, and that language has been the law for less than a year, I think, to go in and start messing with that now, it’d be a real can of worms.”

Talking to developers, however, it’s clear something will have to change or the city will see a sizable decrease in projects going forward.
And what galls them is that they believe city leaders share their goal of creating more affordable housing—but that good intentions may be blinding them to the fallout from their legislation. Says Duffy, “I feel like we’re dealing with people who we have a lot of philosophical alignment with. And you’ll have great face-to-face conversations with these people, and then you see the actual actions they’re taking in their official roles, and it’s so infuriating to all of us, because it’s like, ‘Can you guys produce this many thousands of units for us? And here’s a thousand obstacles we’re going to put in your way.’”