The practice of offering employees housing benefits through employer-assisted programs is becoming more common as employers recognize their bottom-line value and as cost-effective products become more available. Specifically, employers are using employer-assisted housing (EAH) benefits to address internal goals and community issues affecting core business operations, including the need to:
Housing benefits come in many forms. Down payment and closing cost grants and deferred loans are the most common forms of assistance, but employers have also offered mortgage guarantees and shared-appreciation mortgages; donated (or sold at a discount) land, buildings, and/or air rights for development or redevelopment; and invested in nonprofit-owned land trusts. The type and cost of a program tend to vary with the particulars of the local housing market and the cost of not addressing important business concerns. More expensive markets require more involved, if not more expensive, solutions; and similarly, when the cost of recruiting or replacing key workers is greater, employers have a greater interest in spending more to keep an employee.
Housing benefits improve employee access to a permanent tangible asset – making such programs an important employee asset-building tool. In this regard, EAH stands in contrast to some other employee benefits that typically provide value only during the term of employment (e.g., health or life insurance). Recognizing this difference, employees have been willing to enter into innovative relationships with employers to obtain housing benefits. For example, employers that offer housing benefits may require that employees defer or temporarily opt out of participation in expensive benefits such as educational reimbursement programs, the employers’ match to 401(k) and similar pension programs, and/or repay a portion of the housing benefit if the employee leaves the employer prior to a pre-agreed time. This enables employers to offset the cost of housing benefits and amortize that cost against savings that accrue from the reduced expense of employee recruitment, retention, and training.
Some employers have been able to figure out the strategic value of offering a housing benefit and how to do it in a cost-effective way, but most employers know little about housing, housing benefits, or how worker housing status affects matters of corporate concern. As a result, fewer employers are using housing benefits to meet corporate objectives than might otherwise have been predicted.
To overcome employers’ unfamiliarity with housing and housing benefit programs, third-party intermediaries have begun to offer benefit products. These products enable employers to offer benefits without having to become knowledgeable shelter industry professionals, in much the same way that employers can offer health or life insurance coverage without being doctors or actuaries.
Public-sector intermediary interest in EAH stems from the recognition that these programs can promote economic development, neighborhood revitalization, and smart growth as well as leverage new private funds to increase homeownership opportunities. And although these reasons are generally not why employers choose to offer housing benefit programs, government entities are figuring out how to link their public-interest goals with motivations that do engage employers.
For example, a number of state housing finance agencies offer specific EAH mortgage programs. Locally, the Delaware State Housing Authority will match the first $1,000 that an employer provides an employee for a down payment or closing costs. Similarly, the Pennsylvania Housing Finance Agency waives certain program eligibility restrictions when an employer is providing financial assistance, enabling more employees to qualify for the agency’s $2,000 closing cost assistance program.
Some states, most notably Illinois and Connecticut, have created EAH tax credit programs to help offset the cost of offering a housing benefit. Based on the success of this approach, bi-partisan legislation that would create a federal EAH tax credit is pending in Congress.
Cities, too, have become involved in promoting EAH. Some are focusing on municipal employees, particularly teachers and first-responders, while others have integrated EAH into their housing and community development functions. For example, New York City will offer as much as $20,000 per unit in subsidy for new construction when it is linked to an EAH program. Baltimore, Milwaukee, and more recently Philadelphia through its HomeBuyNow program are providing matching cash grants to prospective homebuyers in response to employer aid.
As EAH programs become more familiar and easier to implement as a result of public-sector involvement, banks, as employers and as businesses that understand the importance of homeownership, will have an increased opportunity to work with their employees and business customers in ways that enable EAH programs to expand and build stronger businesses, economies, and communities.
Dan Hoffman has been a consultant to Home•Buy•Now and other EAH programs throughout the nation. He can be reached through eahousing.com.