Davis Bacon Wages and HUD 232 Loans
Borrowers using HUD 232 financing for the construction or rehabilitation of a senior living facility are required to be in compliance with federal wage requirements, which include Davis Bacon wages. The Davis Bacon Act, which was passed in 1931, requires that those working on public works projects are payed a prevailing wage for their local area. Prevailing wage requirements are listed on the Department of Labor website, and can also be determined using this Davis Bacon Wage Calculator, courtesy of wdol.gov.
Section 232 projects may be required to comply with one of two different wage rates, residential or commercial, based on criteria established by the Department of Labor. Borrowers can work with their lender to determine which type of requirement is likely to apply to their project, but the final decision will be made by HUD.
In comparison to HUD 232 construction or substantial rehabilitation projects, projects financed with HUD 232/223(f) loans for acquisition or refinancing are not subject to Davis Bacon wage requirements, since no substantial construction/rehabilitation labor will be done.
Section 241(a) supplemental loans are only subject to Davis Bacon wage requirements if the original loan used to finance the project was subject to Davis Bacon requirements. For example, a project getting a 241(a) supplemental loan that originally financed with a HUD 232 new construction loan would be subject to Davis Bacon, but a project originally financed with a HUD 232/223(f) loan would not be.
More information about Davis Bacon wage standards can be found by visiting HUD's Labor Relations Desk Guide.