California Lawmakers Drop Controversial Construction Wage Plan Amid Labor and Environmental Pushback

SACRAMENTO, Calif. – June 30, 2025 – A controversial proposal to establish a minimum wage for construction workers on certain residential housing projects has been withdrawn from California’s state budget negotiations following fierce opposition from labor unions and environmental advocates, according to sources familiar with the matter.

The provision, which was backed by Gov. Gavin Newsom and legislative leaders as part of a broader push to accelerate housing construction, sparked immediate backlash. The State Building and Construction Trades Council objected strongly, warning that the wage framework would “undercut higher pay standards they’ve won through bargaining and past legislation.”

Environmental groups also voiced alarm, raising concerns that the measure was linked to efforts to weaken environmental oversight of residential development.

While the governor’s office declined to comment, sources confirmed that the wage language would not be included in the fast-moving package of budget-related bills lawmakers aim to finalize by the Monday deadline.

Construction Industry Owners Weigh In

Construction firm leaders expressed mixed reactions.

“We welcome solutions that unlock housing production, but wage proposals need to align with long-term workforce sustainability,” said Mark Reyes, president of a mid-sized residential construction firm based in the Central Valley. “Throwing in a wage mandate at the last minute—without proper dialogue—was bound to create tension.”

Other builders emphasized the need for predictability in policy.

“We already navigate high material costs, local permitting delays, and labor shortages. Adding wage requirements without clarity could jeopardize smaller or infill housing projects,” said Karen O’Neill, owner of a San Diego-based contracting company.

However, some developers saw the governor’s strategy as bold, even if miscalculated.

“Newsom was clearly trying to strike a balance between affordability and labor protections, but you can’t do that by blindsiding your core allies,” said a Bay Area affordable housing developer who requested anonymity.

Broader Stakes in Budget Negotiations

The now-abandoned wage proposal was part of a broader housing initiative meant to streamline approvals by easing environmental review requirements under CEQA (California Environmental Quality Act). Although not directly tied to the $320 billion state budget’s passage, it became a flashpoint that complicated negotiations.

Newsom had previously signaled he would not approve the full budget unless lawmakers also delivered a housing package aimed at speeding construction. This included another contentious bill still being drafted that would relax environmental requirements for certain projects.

With time running short before the new fiscal year begins, lawmakers are scrambling to finalize budget-related legislation while managing mounting pressure from labor, environmentalists, and the construction industry.

What’s Next

While the wage plan has been dropped for now, stakeholders expect the fight over labor standards in housing development to continue later this year.

“We’ll keep pushing for housing solutions that don’t come at the expense of hard-won worker protections or environmental integrity,” said a representative for the Building Trades Council.

Meanwhile, construction owners are urging the state to focus on more inclusive policy-making.

“Let’s get all voices at the table early. That’s the only way we’ll deliver both affordable housing and a fair, sustainable construction industry,” said Reyes.

Originally reported by Lindsey Holden in Politico Pro.