Whenever a presidential election comes up, the economy becomes a central point of debate. One of the key indicators of the American economy is the construction industry, which causes politicians to make a lot of promises to win office. But how much does politics really affect the construction industry? Do political changes really result in substantial losses or gains for the companies that take on construction projects?
Construction Affected By Politics
The construction industry often gets tossed around like a political football to try and help politicians look better and solve problems. Perhaps one of the best examples of construction being bounced around by politicians is the story of the New York City 421-a tax program.
The 421-a tax program was a tax incentive developed in 1971 to try and inspire developers to build low-cost residential properties in New York City. At the time the measure was enacted, the city was losing residents to the suburbs because of the conditions in the city, and the cost for decent housing. The idea was to allow developers three years of tax breaks on the building process, and then 10 years of a graduated scale that gave tax abatements that eventually ran out.
By 1980, the New York City politicians decided that the program was weighed too heavily in favor of contractors, so the program was restricted to certain parts of the city. The program had plenty of success, but it also created problems. One of the biggest problems was the tax rates for tenants when the 10 years are up for a particular building. In one example given by Curbed New York, a tenant currently paying only $35 a month in city taxes would see that rate rise to over $1,600 per month when the 10 years of tax breaks expired in 2018.
Change Of Leadership
When Mayor Bill de Blasio took over, he announced that the 421-a program was going to help build 80,000 new affordable housing units in the city. However, when the politicians and the unions could not negotiate an agreeable labor rate, the city allowed the 421-a program to expire on January 15, 2016.
The 421-a program is a classic example of politicians attempting to influence the construction industry with incentives that were poorly designed. In the end, the inability of the politicians and the unions to extend the project brought it to a screeching halt.
Three Areas Politics Plays A Role
1. Project Planning And Development
According to the University of Delaware, another area where the construction industry and politics cross is in project planning and development. Most large-scale projects need approval from the local government to move forward. If the local government decides to change zoning regulations on a particular plot of land, then that can bring a project to a halt. By the same token, if the government will not agree to alter zoning regulations to help a construction company get a project underway, then that project never sees the light of day.
2. Safety Regulations
Local, state and federal safety laws can also be political vehicles that affect the construction industry. Associated Builders and Contractors, Inc. contends that persistent federal safety regulations are burdensome on contractors and raise the costs of doing business.
At the local and state level, government inspectors often determine whether or not a contractor is acting in the community’s best interests. Subsequently, they can shut projects down that they feel are not being run according to safety laws.
3. Economic Factors
An indirect way that politics affects the construction industry is through political changes that cause the national or global economy to change. The construction industry is extremely sensitive to fluctuations in the economy, and these fluctuations can often be caused by political decisions.
It is said that the inability of the world’s governments to properly monitor the global financial climate was a critical part of the 2008 recession. The construction industry took a tremendous hit during that recession, and it was years before the industry was able to recover.
Politics affects the construction industry in many different direct and indirect ways. When politicians want to try and “jump start” the economy, they will often make laws that invest in public works construction projects. But when politicians make catastrophic economic mistakes, the construction industry often feels the effects harder than any other business sector.
Politics and the construction industry will always enjoy a give and take relationship. As long as construction is one of the most dominant industries throughout the world, it will always be in the crosshairs of politicians.