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Housing help from the boss

By Jay MacDonald

The business case is attractive. In addition to aiding recruitment and retention (thus reducing training, hiring and relocation costs), EAH can help reduce tardiness and absenteeism, revitalize the surrounding neighborhood, improve employee performance, strengthen families by addressing their debt issues and enhance the company's reputation.

"It provides stability for the community and the business," says Michelle King of Fannie Mae's Community Lending Center. "When businesses get involved, it enables employers to retain their workforce as well as provide a very much needed asset: housing. It's a great exchange."

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And one that is growing in popularity. According to the Society for Human Resources Management, 12 percent of companies offered EAH in 2003, up from 7 percent in 2002. Nine percent of employers provided down-payment assistance in 2003, up from 4 percent the previous year, and 15 percent offered rental assistance, compared to 5 percent in 2002.

Fannie Mae started its own EAH program in 1991. Employees must work 180 days to become eligible and remain with the company for five years to receive full forgiveness of the loan. So far, more than 2,500 employees have taken Fannie Mae up on its offer.

Many employers choose to outsource the EAH program, often to a lender or counseling agency better positioned to offer home-buyer education and guidance. Some employers offer time off to attend home-buyer classes or will pick up the cost of such programs. Some offer both.

The cost of an EAH program to the employer is more than offset by the savings accrued from reducing turnover, recruitment, relocation and training. Fannie Mae estimates that a 1-percent reduction in the turnover rate for a company of 5,000 employees can save the cost of hiring and training 50 new employees.

Sweetening the deal

The Chicago-based Metropolitan Planning Council, a 70-year-old nonprofit organization that focuses on land use and policy issues, has helped establish more than 20 employer-assisted housing programs since it took up the cause in 1999.

MPC helped convince the State of Illinois to sweeten the incentives for employers by offering to return 50 percent of the costs of a company's EAH program in the form of tax credits. Nonprofits such as public universities and hospitals that do not need the tax credits are free to sell them. At least two other states, Missouri and Connecticut, also offer tax credits to companies that invest in employer-assisted housing.

MPC housing associate Samantha DeKoven says the tax credits make a good deal even better.

"Typical industry numbers will say that replacing someone costs about the equivalent of their salary: If someone makes $30,000, it will cost that to advertise, recruit and train their replacement. If you invest say $6,000 in an employer-assisted housing initiative for that person, the company gets $3,000 back through tax credits and saves $27,000. It's a huge win."

MPC-initiated EAH programs run the gamut in terms of benefits. Its largest program, the University of Chicago, offers $7,500 forgiven over five years. Most offer in the $2,500 range, but one employer located in a very expensive housing market offers $15,000, some of it forgiven, to employees who stay for five years.

There is a very real infrastructure component to EAH in Chicago, where old high-rise public housing projects such as Cabrini Green are being replaced with more mixed-income housing. There are new initiatives on the drawing board that would help working people purchase new housing in these new developments, in the hope of avoiding the "projects" stigma that afflicted Cabrini Green.

"This is sort of a one-shot deal to overhaul and recreate public housing into good-quality, well-designed, well-maintained housing that is integrated into the community," DeKoven says.

Employers would certainly prefer that their employees live within walking distance to the office, but in some locations that is unrealistic.

"There are two different views on this," says DeKoven. "In expensive housing markets, employers recognize that their employees probably can't afford to own a home there. But some, like the University of Chicago, have a different angle. For them, it's more of a community development initiative. They may be in a community that is in transition and would like to see their community be stable places. If our employees will live here and invest here, that will be good for the employee and good for us."

DeKoven estimates that somewhere between 5 percent to 10 percent of employees will take advantage of EAH programs, making it impractical for very small employers. But for most medium and large businesses, the benefits can greatly outweigh the investment.

"This isn't health care. This isn't something that everybody needs. We think of it more like daycare, which you may need at various stages of your working life. Fifteen years ago, employers said daycare was the employee's problem. Then they found out that if they offered it, their employee base became more stable, and they had less issues with tardiness and absenteeism. This is heading in the same direction."

Jay MacDonald is a contributing editor based in Mississippi.

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-- Posted: Oct. 14, 2004

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