Jake Schwitzer
Sarah Hinde

May 22, 2024

Minnesota is now the first state in the nation to add prevailing wage requirements to LIHTC-funded affordable housing projects

Late Sunday, May 19, 2024, the Minnesota Legislature passed a large omnibus package that included prevailing wage requirements for affordable housing projects that receive funds from Low-Income Housing Tax Credits (LIHTC).

Wage theft and worker exploitation have been persistent problems in Minnesota’s construction industry. Since 2016, workers on 25 projects that received approximately $31 million in LIHTC funding were potentially at risk of exploitation by known problem contractors. North Star Policy Action (NSPA) played a critical role in passing the provisions that will prevent continued worker abuse and exploitation, including releasing a report in November of 2023 that detailed the flow of public funding to contractors with long histories of abusing workers. Jake Schwitzer, NSPA’s executive director, testified in numerous legislative committees during the 2024 Legislative Session about the issue, helping secure inclusion in the omnibus bill.

“The passage of these worker protection provisions is an historic step for worker’s rights, and displays national leadership coming out of Minnesota. Our research exposed disturbing facts about public funding supporting known bad actors in the construction industry, and we are so thankful that the legislature responded to our findings to protect Minnesota’s working people.” Executive Director of NSPA Jake Schwitzer said. “We hope that this bill serves as a roadmap for other states to ensure that taxpayer funded housing projects don’t continue to fuel wage theft, payroll fraud, and other forms of worker exploitation. Thank you to the members of the Minnesota Legislature, Minnesota Housing Finance Agency, Minnesota Department of Labor and Industry, and Governor Tim Walz for your commitment to making Minnesota the best state in the nation for working people.”

LIHTC is one of the most common sources of public financing for affordable housing projects, yet these programs rarely include robust labor standards such as prevailing wage requirements. This legislation makes Minnesota the first state in the nation to add prevailing wage requirements to LIHTC-funded affordable housing projects.

Prevailing wage laws establish minimum wage and benefit levels based on the wages paid for similar jobs in the county where the construction project is taking place. These laws ensure that work on government-funded projects does not undermine local wage standards. The legislation also extends new worker protections across all projects supported by Minnesota Housing Finance Agency, like transparency of who is working on these projects, a Responsible Contractor Standard, and accountability for developers that repeatedly allow wage theft to occur on their projects.

“I want to thank North Star Policy Action for shining a light on what is an egregious problem that we need to solve, said Representative Mike Howard, Chair of the Housing Finance and Policy Committee earlier this legislative session. “When I first read this report I viewed it as a call to action. There is no way, no how that public dollars should ever support the kind of worker exploitation that is detailed in that report. We absolutely can and must build more affordable housing across Minnesota and we absolutely can and must do so in a way that pays living wages and honors and respects the Minnesotans who are building these homes, and that’s what this bill will do.”

Worker protection policies have tangible impacts on Minnesotans and families, such as Arturo Hernandez, who faced labor abuses while working for Painting America, a drywall and painting contractor. In 2019, he testified before the Minnesota House of Representatives Labor Committee, stating that his foreman had insisted on paying him with drugs, claiming he could make more money by selling them. Arturo refused and reported the incident to both Painting America and an enforcement agency. However, no action was taken against the company or the contractor, and Arturo has not been compensated for his three weeks of work. Legislation such as this ensures workers will be protected from similar exploitation.

“I’ve personally been a victim of exploitation in the housing construction industry,” said Hernandez.. “I was very glad to see the legislature take action on this issue and hope that it will protect me and workers like me from these abuses in the future.”

Minnesota Session Laws – 2024, Regular Session