With California’s budget deadline looming, lawmakers are embroiled in a heated dispute over a housing bill that includes lower minimum wages for construction workers — a proposal that's pitting Gov. Gavin Newsom and pro-housing advocates against powerful labor unions.

The new wage language, quietly introduced in a budget bill on Tuesday, is part of a broader deal between pro-development groups and the state’s carpenters union. Backers argue the compromise could transform how housing bills are shaped in California. But opposition from other labor groups has been swift and severe.

“This proposal is a wage grab of construction workers’ wages disguised in an ‘affordable housing bill,’” warned Chris Hannan, president of the State Building and Construction Trades Council, in a letter to legislative leaders. “We urge you to abandon any pursuit of this harmful and unprecedented proposal, which would devastate construction workers.”

The proposal aims to replace the traditional “prevailing wage” — a standard that reflects union-level pay — with a lower wage floor, in exchange for regulatory relief on certain housing projects exempt from the California Environmental Quality Act (CEQA). Supporters argue this move would increase development while still improving wages for non-union workers.

“Residential construction is ‘a virtually non-union industry,’” said Danny Curtin of the California Conference of Carpenters. “You have the ability to give those people a substantial — a modest, but substantial and important — raise.”

But some lawmakers were caught off guard by the change. At a budget hearing, Assemblymember Chris Rogers expressed frustration, saying, “I didn’t come to Sacramento to cut people’s wages.” Assemblymember LaShae Sharp Collins called it “appalling” that key trade unions weren’t consulted.

In the Senate, Democrats shared similar concerns. “You’re presenting something at the last minute,” said Sen. María Elena Durazo. “I don’t know who you consulted with...to completely change the structure for the way that workers in the construction industry would be paid.”

Despite the turmoil, the Democratic supermajority still holds the numbers to pass the bill, even with internal dissent.

The wage provision is part of a broader legislative package that includes CEQA exemptions for urban housing, limits on landlord fees, and expanded tax credits for renters. The CEQA-related measure, introduced by Assemblymember Buffy Wicks, has support from Gov. Newsom, who has signaled he might not sign the budget without it.

California YIMBY President Brian Hanlon praised the proposed deal: “This is one of the biggest wins for housing in a generation. Building infill housing is not a threat to the environment — it’s how we save it.”

The carpenters union has previously backed similar housing deals, such as a 2022 bill that fast-tracked housing along commercial corridors. That collaboration, again led by Wicks, set a precedent for pairing streamlined housing approvals with labor concessions.

Critics argue that even the new wages — $40 per hour in the Bay Area and $36 in Los Angeles for most skilled workers, with $27 for others — fall far short of prevailing wage rates that can exceed $90 an hour with benefits.

For developers, however, this could mark a turning point. Many argue that mandatory prevailing wages have made affordable housing projects financially unviable outside major metro areas. If this new language becomes law, it may set a model for future housing bills aimed at balancing affordability and labor standards.

The clash highlights a growing rift within organized labor as California’s housing crisis intensifies. On one side, the carpenters union is willing to trade top-tier wages for broader employment opportunities and potential union expansion. On the other, traditional trade unions see any compromise as undermining hard-won labor protections.

Newsom’s role as mediator — and enforcer — of this legislative showdown underscores his growing impatience with California’s slow housing production. Tying CEQA reform to budget approval is a high-stakes gamble, aiming to deliver thousands of new units by lowering costs and fast-tracking approvals.

The conflict also underscores a generational shift in Sacramento’s policymaking: housing bills once required full labor backing to move forward, but the new coalition of developers, YIMBYs, and select unions may be rewriting the playbook.

As the final vote looms, the proposal’s fate could set the tone for how California balances labor rights with the urgent need to build housing at scale.

Originally reported by Ben Christopher in Cal Matters.