Davis Bacon Wages are wages established by the 1931 Davis-Bacon Act and required by many HUD programs for public works projects. Workers must be paid the local prevailing wages, typically referred to as Davis-Bacon wages. Compliance with the Davis-Bacon Act is overseen by HUD’s Office of Labor Relations. Specifically, Davis-Bacon wages are required for HUD 221(d)(4) loans and HUD 232 construction and substantial rehabilitation loans. Davis-Bacon wages are not typically required for HUD 223(a)(7) refinances, as they do not usually involve any construction or substantial rehabilitation work (only minor repairs).

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Davis Bacon wages can affect commercial real estate financing if the loan is a HUD 232 new construction or rehabilitation loan. In this case, the loan must pay workers the local prevailing wages, as established by the 1931 Davis-Bacon Act and required by many HUD programs. It is overseen by HUD’s Office of Labor Relations Davis-Bacon compliance division. However, HUD 232/223(f) loans for property acquisition and refinancing typically are not subject to Davis-Bacon wage requirements.

Rental Assistance Demonstration (RAD) public housing conversions (RAD I) transactions are subject to Davis-Bacon, even if the borrower is using a HUD 223(f) loan.

For more information, please visit:

• Davis Bacon Wages in Relation to HUD 232 Loans
• Do Davis Bacon Wage Requirements Apply to HUD 223(f) Loans?
• Davis-Bacon Act

The Davis-Bacon Act of 1931 established requirement for public works projects in which workers must be paid the locally prevailing wages, typically referred to as Davis-Bacon wages. Compliance with the Davis-Bacon Act is required by many HUD programs and overseen by HUD’s Office of Labor Relations. Specifically, Davis-Bacon wages are required for HUD 221(d)(4) loans and HUD 232 construction and substantial rehabilitation loans. Davis-Bacon wages are not typically required for HUD 223(a)(7) refinances, as they do not usually involve any construction or substantial rehabilitation work (only minor repairs).

No. There are multiple criteria that determine whether or not a contractor is subject to these requirements. Typically, they only apply to manual labor jobs — think plumbers, elevator mechanics, and ironworkers. Management personnel and architects are exempted from these requirements — though foremen may be covered if they spend more than 20% of each working week on physical labor tasks.

Beyond the type of job, the location where the work is performed can also be a criteria for determining eligibility. Broadly speaking, if the labor is conducted at the development site, the worker is probably covered under the Davis-Bacon Act. On the other hand, off-site workers — say, those assembling building parts at a facility some distance away — may not be covered. This is especially true if the facility they work in assembles or fabricates parts or tools for other developments.

Davis Bacon wages do not typically apply to small business financing, as they are only applicable to certain HUD multifamily construction loans, such as HUD 221(d)(4) loans, and HUD 223(f) loans for property acquisition and refinancing. Source

Davis Bacon wages provide a number of benefits for commercial real estate financing. These include:

• Ensuring that workers are paid a fair wage for their work.
• Providing a level playing field for contractors, as all contractors must pay the same wage.
• Reducing the risk of labor disputes, as workers are paid a fair wage.
• Reducing the risk of cost overruns, as contractors are not incentivized to cut corners.

For more information on Davis Bacon wages, please visit https://www.hud.gov/program_offices/davis_bacon_and_labor_standards.