A resurgence in labor union activity has many U.S. employers on edge, and it's spreading to the commercial real estate industry. Recently, major unionization drives have been gaining attention, led by companies such as Amazon and Starbucks. Labor unions also enjoy strong public support, with 67% of Americans supporting labor unions, according to a recent Gallup poll. Public support for labor unions has grown steadily over the past decade, but is still not as strong as it was in its post-World War II heyday.
While interest in labor unions is on the rise, a closer look at the data paints a different picture. According to Labor Department data, U.S. labor unions gained 139,000 members last year, but the percentage of workers who are union members declined slightly. About 10% of U.S. workers were unionized in 2023, down from 10.1% in 2022 and the lowest percentage in the Labor Department's records dating back to 1983. This rate is also a far cry from the peak of U.S. union membership in the 1950s, when about one-third of private-sector workers were unionized. The wave of labor unionization is not all hype, but the percentage of non-union employment in the United States is growing rapidly.
There are many reasons why unionization efforts in the United States face difficulties. A major reason is U.S. labor laws, which make it relatively easy for employers to circumvent organizing efforts. “U.S. labor laws pose significant barriers to workers joining unions,” said Suresh Naidu, a Columbia University economist who has emerged in recent years as a leading expert on U.S. labor unions. For example, about 27 states have “right to work” laws, which make it more difficult to form a union.
Despite these obstacles, labor unions are more popular than they have been among Americans in decades, especially among younger workers. The resurgence of interest in labor unions is impacting the commercial real estate industry. Two major influences are the efforts to organize janitorial and building maintenance workers. Last year, the Service Employees International Union Local 32BJ, which represents about 80,000 building service workers in New York City, voted to strike and rallied in December. The strike was averted by a tentative agreement with the Real Estate Labor Relations Advisory Board that included four years of gradual wage increases, a 10% increase in pension benefits, and improved health care benefits. A strike would have affected operations in about 1,300 buildings in New York City alone.
Janitor workers are organizing across the country. Thousands of hotel workers across the country protested in May amid labor disputes at major hotel brands, including Marriott, Hyatt, and Hilton, as union contracts covering nearly 40,000 workers expired or were set to expire later this year. In Chicago, more than 1,000 janitors represented by SEIU Local 1 rallied in March. Janitors work in 85% of Chicago's commercial office buildings, cleaning several well-known buildings, including Willis Tower and Hancock Tower. The unionized janitors received support from Mayor Brandon Johnson and dozens of city council members.
These are just some of the surges in union activity that are disrupting operations in commercial buildings across the country. In the post-COVID era, young workers who were deeply involved in social justice movements are bringing that enthusiasm to the workplace, breathing new life into unionism. Young people who cannot remember unpleasant union-related experiences are bursting with idealism. Recent decisions by the National Labor Relations Board (NLRB) last year have also altered the unionization process, tilting the playing field in favor of workers and increasing the risk of corporate misconduct.
The Labor Relations Board's decision at CEMEX Construction Materials Pacific has changed the way employers approach union organizing. Prior to this decision, there was only one typical path that unions could take to organize. Now, unions have a new, easier way. If a union gets authorization cards from most of the workers, it can ask the employer for recognition without holding a secret ballot election. The company can then voluntarily recognize the union or file a petition for a secret election. In addition to the simplified path to organizing, employers must be more careful in communicating with employees when organizing efforts are taking place to avoid violating the NLRB.
Increased organizing activity among building service workers poses challenges throughout the real estate industry. Tenants, landlords, and building service contractors face risks associated with increased union activity. Although unions provide significant benefits to employees, they also have some drawbacks for employers. Union contracts can corrode company culture, impose disadvantages in the form of production restrictions, and prevent workers from taking on responsibilities that are not explicitly stated in their job descriptions. Unions can also stifle individual initiative. In unionized workplaces, most contracts require that employees be promoted based on next in line rather than ability. Seeing employees who may be less capable in some cases promoted solely on seniority can discourage hard work and damage workplace culture.
A more immediate challenge in the multifamily sector is the re-emergence of tenant unions, which emerged in the 1960s and 1970s. According to Moody's, the rent-to-income ratio exceeded 30% last year for the first time in more than 20 years, meaning the average American renter spends more than 30% of their income on rent and can be classified as rent-burdened. The American dream of homeownership is out of reach for many, and renters now make up about one-third of the U.S. population, and in some cities, half or even two-thirds of the population.
These trends have sparked a “tenant revolt” in parts of the country. Renters are forming tenant unions, grassroots organizations that pressure landlords and local governments to protect their rights. These movements have prompted reforms in cities like New York, Miami, and Los Angeles. One of the most effective tenant unions is KC Tenants in Kansas City, Missouri. Over the past few years, the organization has prevented thousands of evictions, won millions of dollars for affordable housing, and grown its membership to nearly 10,000. Four of the six candidates endorsed by KC Tenants were elected in recent Kansas City City Council elections.
Like labor unions, tenants' associations can bring great benefits to tenants but landlords' nightmares. Tenants' associations could change the way landlords negotiate with tenants and could also change the way maintenance and repairs are handled. Landlords are used to writing standard leases and giving tenants few options for changes, but a union could have the power to negotiate specific terms as a group. Tenants' associations would fight to ensure that lease terms are enforced, but would likely take to court or engage in political lobbying if they were not satisfied with the landlord's response.
Of course, pressuring a landlord to honor rental obligations and comply with applicable state and local housing laws is not necessarily a bad thing. Conscientious landlords do this anyway. The tricky part of negotiating with a tenants association is dealing with situations that could be interpreted as retaliation against a union member. Suppose a landlord has a legitimate reason for evicting a union member tenant. In that case, the landlord would need to document their reasons more carefully or consult with an attorney to avoid being subject to a retaliation claim. Other actions that could be interpreted as retaliation include increasing rent, refusing to offer discounts that you would normally offer, or refusing to renew a lease.
The resurgence of labor unionism in the United States is affecting many industries, and commercial real estate has not been spared. Thanks to U.S. labor laws, employers still often have the upper hand, but recent decisions such as those by the National Labor Relations Board are paving the way for labor unions. In the real estate industry, building service worker unions are the main threat that could cause future disruption. The resurgence of tenant unions, popular a few decades ago, is also a concern. The real estate industry must tread carefully in dealing with the rise in labor union activity. Worker and tenant unions may not be as widespread as they were a few decades ago, but a younger generation of activists is more enthusiastic than ever before.