Company Leaders: How to Help Your People Beat High Housing Costs
In a previous article, we discussed ways cash-strapped companies can satisfy employee demands without increasing salaries. These include providing employees with special recognition/awards, one-on-one coaching, training, and clear avenues for advancement.
But there’s yet another possibility that’s becoming especially popular in New York, San Francisco, and other big cities with sky-high housing costs: Providing employees with housing assistance. Of course, helping employees rent or even buy homes is not a benefit every company can offer. It obviously requires significant capital to implement—however for those organizations that have the cash, it can be an excellent way to attract and retain valuable talent.
Housing Affordability as an Employee Recruitment Issue
Traditionally, the salaries qualified workers can demand are partly a function of the local cost-of-living. The higher an area’s housing costs, the more an employer must pay even low-tier workers just so they can obtain adequate shelter. For example, in Houston, where housing costs are relatively low, the average cafeteria cook costs its employer $29,000 a year. But in San Francisco, where housing costs are through the roof, that same cafeteria cook costs an employer $47,000 a year, an increase of more than 60 percent!
When demand for labor is high and supply low—as it is today in many markets—companies whose wages don’t allow workers to rent even a modest studio apartment within reasonable commuting distance will find themselves at a disadvantage. The issue becomes even more pronounced when recruiting high-level management and executive talent. (A 30-something MBA graduate with 10 years of experience, a new spouse, and dreams of starting a family is likely to want a house commensurate with their ambitions.) If such people cannot find what they’re looking for at your company, they will look elsewhere.
A Short History of Housing Assistance
The idea companies should help employees obtain affordable accommodations is not new. In the late 18th and 19th centuries, long before the advent of buses, street cars, or other public transportation, large employers built company towns around their factories so workers could live within walking distance of their jobs. Famous company towns include Pullman, Illinois, built by the Pullman Sleeping Car Co. founded in 1880; Steinway Village in Astoria, Queens, New York, built by Steinway Piano Co. beginning in 1874; Gary, Indiana, built by U.S. Steel starting in 1901; and Alberta, Michigan, built by the Ford Motor Co. starting in 1936. Company-subsidized housing in these company towns tended to be quite basic—perhaps “bleak” is a better word—by modern standards, but they provided workers with a convenient place to lay their heads after a long day’s toil.
The company town idea faded away by the mid-20th century with the rise of labor unions, which forced large employers to provide workers with greater wages and benefits. Also, the automobile and public transportation enabled workers to travel longer distances between their homes and work. Plus, the explosive creation of suburbs, freeways, and low-cost mortgage instruments in the decades following World War II all combined to offer middle-class families a chance to live the American Dream at an affordable price.
But that dream could not last forever. An expanding population, strict zoning laws, and tightening lending criteria drove up the price of existing housing while making new construction more expensive and less convenient. Unable to find affordable homes or even rental apartments close to their jobs, many were forced to flee to distant towns where the cost of living was lower, resulting in a spike in commuting times. The recent trend toward Work from Home (WFH) options have mitigated this somewhat, but as concern over COVID-19 continues to wane, some companies are insisting employees either return to the office full- or part-time, once again making affordable housing an issue.
Housing Assistance Options
The type and extent of housing assistance a company can provide depends on several factors, including a business’ size and financial situation, local market conditions, and the company culture.
Options to consider include:
Employee Housing Subsidies: Offer financial support in the form of housing assistance or stipends. This can be a monthly or annual allowance employees can use towards their rent or mortgage payments. The amount can be determined based on factors such as job position, seniority, and location. This approach provides employees with flexibility in choosing their housing while alleviating some financial burden.
Company-Owned or Leased Housing: Organizations can opt to own or lease housing units, such as apartments or houses, which they then rent to employees at a reduced rate. This approach ensures employees have access to affordable options directly affiliated with the company. It can be particularly useful in high-cost areas.
Homeownership Assistance Programs: These include direct down payment assistance, low-interest mortgage loans, or shared equity arrangements.
Relocation Assistance: When employees need to relocate, consider covering a portion of their moving and housing-related expenses. This can include covering moving costs, temporary housing during the transition, or helping them find suitable rental properties in the new location. By easing the financial burden of relocation, this benefit can make the prospect of moving for work more attractive.
Ultimately, when considering any housing assistance program, it's crucial for businesses to communicate the details clearly to personnel, ensure fairness and equity in distribution, and comply with applicable tax laws and regulations. Also, consider consulting with legal and financial professionals to design and administer these programs most effectively.
Finding innovative ways for companies to attract and retain top talent is a service we’ve practiced for more than 30 years at Conover Consulting. For help determining if a housing assistance plan is right for your business, please contact me at laura@conoverconsulting.com. My door is always open!