New York construction unions have reached an agreement to cut the wages of members working on a massive residential project on the far West Side by 20%, sources said. The project, which will include more than 500 units of affordable housing, is being developed by the Gotham Organization Inc.

Meanwhile, Forest City Ratner Cos. has applied to the unions for similar wage cuts as it prepares to begin construction of its first residential tower at the long-planned Atlantic Yards project in Brooklyn. There, at least 50% of the approximately 400 residential units will be affordable.

The unions, in conjunction with contractors, began cutting wages and changing work rules for certain projects back in 2009 as part of an effort to lower construction costs and jumpstart projects brought to a standstill by the recession. It was just such an agreement that was a critical element to moving forward with Forest City’s Frank Gehry-designed residential tower downtown. At one point, the developer had proposed capping the 76-story tower at roughly half its height, but that never happened. It opened earlier this year.

Typically, the union offers concessions that lower labor costs by 10% to 15%. However, unions make steeper cuts for developers building affordable housing or residential projects in the outer boroughs because they tend to command lower sale prices and rents. Additionally, non-union labor has made greater inroads into those sectors than in major commercial projects in Manhattan.

Spokesmen for the Building & Construction Trades Council of Greater New York, a union trade group, and Forest City declined to comment. Gotham President David Picket couldn’t immediately be reached.

In the last several weeks, Gotham has reached a deal to secure a $530 million construction loan from a group led by Wells Fargo to build what is known as Gotham West. The four-building complex will consist of about 1,240 residential units and take up almost an entire city block bounded by West 44th and West 45th streets and Tenth and Eleventh avenues. Construction on the project, which will also include a parking garage and 17,000 square feet of retail, is expected to begin in the third quarter of this year, according to the company’s website.

The Gotham development will include a 31-story tower located on Eleventh Avenue with about 700 units. Adjacent to the tower, another mid-rise building will house 297 affordable-housing units available to low-, moderate- and middle-income families. Further east, toward Tenth Avenue, two 14-story buildings will be situated atop a platform over the Amtrak tracks and will include an additional 243 units of affordable housing.

The loan would be another sign of improvement for the beleaguered construction industry, which suffered horribly as development came to a virtual standstill during the recession. Lately there have been numerous signs of life in the industry. Just last month, Boston Properties announced it had secured law firm Morrison & Foerster as an anchor tenant for an office building on West 55th Street and would resume construction on the property, which was halted during the recession.

Source:  Crain’s New York Business