Davis-Bacon Wage Requirements for Project-Based Vouchers

The Davis–Bacon Act of 1931 is a U.S. federal law that sets the requirement for paying the local prevailing wages on public works projects for laborers and mechanics. It applies to “contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works.”

On March 9, HUD issued a notice providing guidance on when Davis-Bacon wage requirements may apply to existing housing developments. This guidance relates to the final rule published by HUD on June 25, 2014, amending the regulations governing the Section 8 Project-Based Voucher (PBV) program, largely due to changes made in the PBV program by HERA 2008.

Prior HUD requirements exempted existing PBV units from paying Davis-Bacon wages, and occasionally projects would use the classification of existing housing to avoid payment of prevailing wages. The final rule eliminated this exemption but has caused confusion because the scope of its applicability was unclear. For example, sometimes existing housing requires routine or minimal rehabilitation, and it was unclear whether Davis-Bacon applied to those situations.

The notice clarifies that Davis-Bacon requirements apply to existing PBV units when the nature of any work to be performed either before the execution of the housing assistance payment (HAP) contract or within 18 months after execution constitutes project “development.” The PBV program defines “development” as construction or rehabilitation of PBV housing after the selection date for a proposal. The scope and timing of the “development” work are important to determining whether Davis-Bacon requirements apply to existing housing under the PBV program.

“Scope” refers to specific activities being conducted. Remodeling work that alters the nature or type of housing units, reconstruction, or substantial improvements in the quality or kind of original equipment and materials constitutes “development.” Further, any “development” initiated on existing units within 18 months after the effective date of the HAP contract on projects with nine or more units assisted under a PBV HAP contract triggers Davis-Bacon requirements.