Affordable housing, already an oxymoron in most California cities and especially the Bay Area, just became more unaffordable due to a new state law.

Beginning on Jan. 2, any private project that receives a public subsidy in any form—such as donated land, waivers on fees, cash or forgivable loans—must pay construction workers the “prevailing wage.”

The prevailing wage, set by the state Department of Industrial Relations, is always interpreted as the union wage and will raise the cost of housing from 15 to 30 percent. The measure, SB975, signed by Gov. Gray Davis last October, is so sweeping that it affects even the smallest emergency program for seniors.

Virtually all affordable housing projects include a mixture of funding sources, making the law’s exemption for those projects built exclusively with assistance from redevelopment agencies meaningless.

Most privately financed affordable housing projects receive some form of public subsidy, from government grants to fee waivers and tax exemptions. In addition, many inner-city revitalization projects are partnerships between communities and the private sector, made possible by similar investment incentives.

Since these subsidies were put in place to encourage private investment in affordable housing and inner-city development, it makes little sense to enact a law that will do exactly the opposite. It is especially risky business when California is already facing a serious housing crisis.

This law, which might be called the Unaffordable Housing Perpetuation Act, is a subdivision of the federal Davis-Bacon Act, a measure from the 1930s that mandates union labor, under the “prevailing wage” euphemism, on all government projects. Davis- Bacon is the primary reason that everything built for the government is as expensive as humanly possible.

Part of the motivation for Davis-Bacon was to lock out African Americans from government work, protecting white workers from being undercut by cheaper labor. The motivation for Gray Davis’s “bacon” is to reward Big Labor, one of the Democratic party’s most important campaign funding sources. Although Big Labor is exceptionally heavy in political clout with the Davis administration, it is not so significant in the larger picture.

Organized labor represents less than 15 percent of workers in California and across the nation. The percentage of workers represented by Big Labor has been in steady decline from around 30 percent during the 1950s. Only public-sector unions such as the teachers’ union are growing, both in numbers and militancy. The Unaffordable Housing Perpetuation Act is a way of fattening unions’ share of the government pie, at the expense of the poor and disadvantaged.

In addition, this law discourages non-unionized companies from bidding on the very projects that their taxes subsidize. By any standard, this is unfair, unjust and undemocratic. So is the state law that allows unions to confiscate money from non-members and use it for political purposes, such as lobbying to require union labor on low-cost housing projects.

The support of Gov. Davis for unaffordable housing is entirely in character. One of his first moves as governor was to reverse the successful privatization efforts of the previous administration. Gov. Pete Wilson had, for example, privatized cleaning services for government buildings. Gov. Davis did away with this, giving the work to government workers, members of government unions, at double the cost to California taxpayers.

The latest Davis bacon will mean more perks for construction workers already making more than $20 per hour. But it will put housing farther out of reach for those who need it most. The number of homeless, already high, will be increased. There is a way, however, to lower housing costs.

As a matter of policy, all public projects should be open to bids from all companies, not just unionized companies, and union-negotiated wage rates should not be enforced on non-union companies. The regulatory burden that builders face could also be lightened.

These moves would lower costs across the board, but they are hardly likely under current conditions. The next casualty will be affordable driving. Bay Area politicos, led by San Francisco’s Democratic Assemblywoman Carole Migden, are proposing to eliminate recent reductions in the car tax, seeking to turn back the clock to the days when the yearly fees were truly punitive, not affordable as they are now. Though predictably billed as a way to soak the rich, this will hurt working Californians the most.

Our state leaders truly have strange ways of wishing us a happy new year.

Examiner columnist Sally Pipes is the President and CEO of the Pacific Research Institute, a California-based think tank. She can be reached via email at spipes@pacificresearch.org.