As Recovery Act spending ramps up and stimulus money starts to hit the streets, trade contractors eyeing the billions of dollars allocated for low-income home weatherization and state-backed building energy-efficiency loan programs have been running into an unfamiliar roadblock: the Davis-Bacon Act of 1931, passed decades ago during the Great Depression. Davis-Bacon requires contractors on federal projects to pay local “prevailing wage” rates for all trade work on site. Under the Recovery Act, contractors on any stimulus-funded job are subject to the same requirement.

Davis-Bacon applies not just to low-income weatherization, but to any project that receives even partial assistance from federal dollars allocated in Division A of the American Recovery and Reinvestment Act of 2009, the spending portion of the bill. Division B, the tax portion, isn’t included, so tax-credit–eligible work on private homes is not...

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