A resurgence in union activity has had many U.S. employers on high alert, and it’s creeping into the commercial real estate industry. High-profile unionization campaigns have garnered attention recently, notably at companies like Amazon and Starbucks. According to a recent Gallup poll, labor unions are also enjoying high levels of public support, with 67 percent of Americans approving of them. Public support of unions has risen steadily over the past decade, though it’s nowhere near as high as it was in its post-World War II heyday.
While there’s an upsurge in union interest, a closer look at the data shows a different picture. According to Labor Department data, U.S. labor unions added 139,000 members last year, but the share of workers who are union members slightly fell. About 10 percent of the American workforce was unionized in 2023, down from 10.1 percent in 2022, marking the lowest percentage in Labor Department records dating back to 1983. The rate is also a far cry from the height of U.S. union membership in the 1950s when about a third of the private sector workforce was unionized. The wave of union activity isn’t all hype, but the share of non-union jobs in the U.S. is growing faster.
There are many reasons why unionization efforts face an uphill climb in the U.S. The primary reason is American labor law, which makes it relatively easy for employers to circumvent organizing efforts. “American labor law just puts an enormous barrier in the way of workers joining a union,” said Suresh Naidu, a Columbia University economist who has emerged in recent years as a leading scholar of unions in the U.S. For example, about 27 states have ‘Right to Work’ laws, making forming a union more difficult.
Despite these obstacles, labor unions are the most popular among Americans in decades, especially among younger workers. The revitalization of union interest is impacting the commercial real estate industry. Two significant impacts are the organizing efforts of janitorial and building maintenance workers. Last year, the Service Employees International Union Local 32BJ, representing about 80,000 building service workers in New York City, voted in favor of a strike and held rallies in December. The strike was averted after a tentative agreement with the Realty Advisory Board on Labor Relations, which included a four-year progressive wage increase, a 10 percent pension benefit raise, and improvements to healthcare benefits. If the strike happened, it would’ve impacted the operations of about 1,300 buildings in New York City alone.
Building service workers are organizing elsewhere across the country. Thousands of hotel employees nationwide staged protests in May during a labor dispute at major hotel brands like Marriott, Hyatt, and Hilton, as union contracts covering nearly 40,000 workers expired or were set to expire later this year. In Chicago, over 1,000 janitors represented by SEIU Local 1 rallied in March. The janitors work at 85 percent of Chicago’s commercial office buildings and clean several high-profile properties, including Willis Tower and Hancock Tower. The unionized janitors got support from Mayor Brandon Johnson and dozens of city aldermen.
These are just a few examples of a flurry of union activity disrupting operations at commercial buildings nationwide. In the post-COVID era, younger workers who were heavily involved in social justice activism have taken their enthusiasm into the workplace, breathing new life into labor organizing. Younger people who can’t recall more unpleasant union-related experiences are brimming with idealism. A recent decision from the National Labor Relations Board (NLRB) last year has also changed the labor organizing process, tilting the playing field more toward workers and raising the stakes for company misbehavior.
The labor relations board decision in Cemex Construction Materials Pacific, changed how employers must deal with union organizing. Before the decision, there was typically one traditional path unions would take to organize. Now, unions have a new, more straightforward path. If a union obtains authorization cards from most workers, it can now demand recognition from an employer without having to do a secret ballot election. The company can then voluntarily recognize the union or file a petition for a secret election. Along with the simplified path to organizing, employers must also be more careful in communicating with employees when organizing efforts occur to ensure they don’t run afoul of the NLRB.
Increasing organizing activity among building service workers poses challenges across the real estate industry. Tenants, landlords, and building services contractors face risks in the rise of union activity. Unions bring significant benefits to employees, but there are several drawbacks for employers. Union contracts can erode company culture, create disadvantages in the form of production limitations, and keep workers from taking on responsibilities not explicitly described in their job descriptions. Unions can also discourage personal initiative. In a unionized workplace, most contracts require promotions based on next-in-line instead of competencies. Watching employees who may, in some cases, be less competent get promotions only because of seniority can discourage hard work and harm workplace culture.
A more pressing challenge in the multifamily sector is the re-emergence of tenant unions, which had previously risen to prominence in the 1960s and 1970s. According to Moody’s, the rent-to-income ratio crossed 30 percent for the first time in more than two decades last year, meaning the average American renter now spends over 30 percent of their income on rent and can be classified as rent-burdened. With the American Dream of homeownership out of reach for many, renters now comprise about one-third of the U.S. population and can account for half or even two-thirds of the population in some cities.
These dynamics have prompted a ‘renters’ revolt’ in some parts of the country. Renters are forming tenants’ unions, grassroots organizations that pressure landlords, and local governments to protect tenants’ rights. These movements have prompted reforms in New York, Miami, Los Angeles, and other cities. One of the most effective renters’ unions has been KC Tenants in Kansas City, Missouri. Over the past few years, the organization has blocked thousands of evictions, won millions of dollars in funding for affordable housing, and grown to nearly 10,000 members. Four of the six KC Tenant-endorsed candidates won races in a recent Kansas City Council election.
Like labor unions, tenant unions can bring enormous benefits to renters but become nightmares for landlords. Tenant unions change how landlords bargain with tenants and may also change how maintenance and repairs are done. Landlords are used to creating standard lease agreements and not giving tenants many options to change them, but a union may have more power as a group to negotiate for specific terms. Tenant unions fight to ensure lease terms are enforced, and they may also be more likely to go to court or engage in political lobbying if not satisfied with a landlord’s response.
Of course, increasing pressure on landlords to honor lease obligations and follow applicable state and local housing laws isn’t necessarily a bad thing. Good landlords do this anyway. What gets tricky when dealing with tenant unions is navigating situations where it could be construed as retaliating against unionized tenants. Suppose a landlord has a lawful reason to evict a tenant in the union. In that case, they will need to more carefully document their reasons or consult with a lawyer to ensure they’re not hit with a retaliation claim. Other actions that could be construed as retaliation include charging higher rents, not offering discounts you typically would offer, or declining to renew leases.
The resurgence of union activity in the U.S. has affected many industries, and commercial real estate hasn’t been spared from the impact. Employers still have the upper hand in many cases, thanks to U.S. labor laws, but recent decisions such as those by the National Labor Relations Board are opening doors for unions. In the real estate industry, the labor organizing of building service workers is the primary threat that could cause future disruptions. A resurgence of tenant unions, popular decades ago, is also cause for concern. The real estate industry must tread carefully when dealing with increased union activity. Labor and tenant unions may not be as widespread as they were decades ago, but a younger generation of activists is more fired up than ever.
Read more: How The Rise Of Unions Is Impacting Commercial Real Estate.