Understanding Employer-Assisted Housing As presented by Amy L. W. Hosier. Ph.D, Director of Research and Policy Homes for Working Families To The Drachman Institute The University of Arizona April, 4, 2008

Our Work Homes for Working Families is a national, nonprofit organization dedicated to advancing policy changes that enable more of America’s working families to find safe, good-quality homes they can afford. Focus on moderate-income households, those generally earning between 60% and 120% of area median income. Offer best practices, policy solutions, data, public opinion and topical research, and promising tactics to address home affordability challenges. Create local coalitions by bringing together business executives, policy-makers, and civic leaders to identify and lend their leverage to local policy solutions.

Affordability Gap Homes For’s research paints a difficult affordability picture for middle-income households in both strong and weak markets. The situation is unlikely to improve greatly in the short and medium term. Credit is tightening, limiting households’ room to maneuver in gaining and maintaining mortgage finance. While house prices are falling, they are unlikely to fall enough to restore affordability to historically more normal levels. These findings strongly indicate that continued efforts are needed from policy-makers, lenders and employers to ensure households’ access to homes.”

Current environment: recession already plagues part of the country In recession Near recession Expansion Source: Moody’s Economy.com

An Unprecedented Housing Downturn... % change from peak, Sources: Fiserv Lending Solutions, Census, Moody's Economy.com House price Home sales Housing starts Forecast peak-to-trough Peak to 2007Q3 90s peak to trough 80s peak to trough Source: Moody’s Economy.com

Housing Least Affordable on East and West Coasts: Housing affordability index, 2007Q3

Credit Quality Deteriorates Most on the Coasts Change in first mortgage delinquency rate, 05Q4 to 07Q4, % of $

Faster Price Growth for Cheaper Homes: Los Angeles CSI tiered house-price indexes, 2000Q1=100, SA

Home Affordability Gap

Increase in Annual Household Spending, 2000-2005*

Median Home Price vs. Median Household Income: Tucson and Phoenix

Affordability Gap: Phoenix and Tucson

What Is EAH? Employer-assisted housing encompasses any type of housing or housing-related benefit that an employer provides Housing benefits historically offered by employers for relocation and/or recruiting senior positions Today’s EAH includes a variety of benefits for employers to help their workforce afford and access homes and to achieve other goals

Drivers to Create an EAH Program Persistent disparity between home purchase and rental costs and wages Long, increasingly costly commutes Helping workforce to achieve better work-life balance Creating more sustainable communities – good civics and good business A flexible, family-friendly employee benefit that is easy to administer and is cost-effective

EAH Makes Good Business Sense Enhances recruitment efforts in an increasingly competitive labor market Increases employee retention, company loyalty, and job satisfaction Improves workforce dependability Improves workforce and community stability Leads to cost-savings Dovetails with community betterment programs Improves company reputation Can help create greener, more sustainable communities It works, it’s easy, and it’s cheap” (Henry Webber, University of Chicago)

Employer-Assisted Housing

EAH program started in 2002 Developed as a partnership with NeighborWorks Columbus, a private, community-based, nonprofit organization. Designed to increase employee morale, productivity and well-being, as well as increase investment in the surrounding community. Program Details $1,000 “no strings attached” grant for down payment assistance; loan is increased to $5,000 for home purchases in target areas. Program is restricted to first time homebuyers. Homeownership and financial counseling are required for all program participants.

Implementation Insight 200+ employees have received homeownership and financial counseling; 44 have purchased their first homes through the program. Implementation Insight By limiting the program to first-time homebuyers, Aflac was able to target its desired income group without adding further restrictions to its program. Making more money available to employees for the purchase of homes in a targeted neighborhood did not correlate with a greater number of employees purchasing homes in that area.

Housing Trust of Santa Clara County Program Details: Applied Materials helps to make homes more affordable by funding the Housing Trust of Santa Clara County. Has committed $1.4 million to the Housing Trust of Santa Clara County since 2000. Designed to aid recruitment and increase affordable home opportunities for other critical workers in the area. Housing Trust of Santa Clara County Program Details: Up to $6,500 in down payment assistance for first-time homebuyers. (Up to 120 percent of AMI) Low-cost financing for qualifies developers of affordable multifamily rental units. (Up to 80 percent of AMI)

Nearly 2,000 families, including 10 Applied Materials employees, have used the first-time homebuyer assistance; 1,200+ affordable rental homes have been created. Applied Materials used peer-to-peer approach to raise funds for Housing Trust program. The model used for the EAH program brought together a variety of representatives from community organizations, businesses and government in a partnership that benefits everyone in the community.

Program Details “Home Buyer Assistance Program” began in 2002. Designed to help provide employees with meaningful assistance to mitigate the high cost of homes in many markets where the company does business. Program Details $5,000 loan for the purchase of a primary residence; loan is increased to $8,000 for home purchases in select area. Loan is completely forgiven provided the employee remains with the company for five years. First-time homebuyers are required to receive credit counseling (also available to all employees). Eligible employees must have worked for CFG for at least one year, have a base salary of less than $100,000 and must work 20 or more hours per week.

3,100+ employees nationwide have received loans to purchase homes; of that number, 188 have received loans for $8,000 to purchase homes in designated emerging communities. Since 2002, CFG has committed $17 million in forgivable loans through the program.

“Prescriptions for Homeownership” started in 2005. $500 grant for closing cost assistance, which is matched by lending partner. Homebuyer education and counseling. Designed to recruit pharmacists and other employees in high-cost D.C. housing market. 160+ employees have received homebuyer education and counseling; 50+ have purchased homes. Launched program in Los Angeles in 2007; in 2008 will launch in Chicago, Cleveland and Detroit. CVS believes its decision to partner with a faith based organization provided a level of employee privacy and trust.

“Walk to Work” launched in 2000. $2,500 in down payment assistance for home purchases in select area. Homebuyer education and counseling. Third-party administration of program. Designed to strengthen the community and increase employee satisfaction. From 2000 to 2005, 70 employees received homebuyer education and counseling; 27 purchased homes in the target area surrounding company headquarters. Program resulted in more employees living in neighborhoods around the headquarters, which has strengthened the surrounding community.

EAH program started in 1991. All full time employees are eligible. Average assistance: $5,500 for a home purchase, $500 for refinancing and $600 per year for rent. Various discounts on services related to purchasing, refinancing or renting a home. Program administered by membership-based third-party organization. Designed to help recruit and retain employees in a high-cost housing market. From 1996 to July 2007, 43 employees took advantage of the program: 24 purchased homes, 17 refinanced and two used rental assistance.

Long Island program began in 2004; Mississippi Gulf Coast Program began in 2005. Long Island: $5,000 grant for down payment on a primary residence. 3-to-1 matching grant money also available through state program. Homebuyer education. Gulf Coast: Up to $7,500 for first-time homebuyers or employees who are either building, purchasing or rebuilding homes post-Katrina. 3-to-1 matching grant money available through local business development corporation. By October 2007, 20+ Long Island employees received homebuyer education and nine purchased homes. NGSS executives have determined that it costs approximately $50,000 to $60,000 to replace an employee. The EAH benefit costs approximately $7,500 to $9,500 per employee. NGSS anticipates the EAH program will increase retention, leading to significant cost savings.

EAH program started in 2000. Invests in the development of new affordable homes. Down payment assistance (household income at or below 80 percent of the statewide median income) and homebuyer education (all employees). Administered through a public-private-nonprofit partnership. Designed to create affordable home opportunities in an area where the housing supply is tight. 120 homes were built in the first phase of development. The second phase will add up to 82 more homes. 40 employees received homebuyer education; 13 purchased homes in affordable development.

EAH program launched in 2000. Employees must be full time employees earning up to 80 percent of the area median income. $5,000 interest-free loan for down payment on home in select area. The employee must contribute either $1,000 or 1 percent of the purchase price of the home, whichever is greater, toward the downpayment. Homebuyer education and financial counseling. Third-party administration of program. Designed to help recruit skilled workers and combat higher than normal rates of absenteeism. By June 2007, 122 employees received homebuyer education and financial counseling; 67 purchased homes. System Sensor’s management team calculated that the program not only recouped its initial investment, but ultimately saved approximately $100,000 per year in the form of workforce stability.

EAH program began in 2003. $7,500 interest-free forgivable loan for down payment and closing costs. Homebuyer education and credit counseling. Designed to promote homeownership and investment in targeted redeveloping areas surrounding the university. 450+ employees participated in the homebuyer education and credit counseling services; 158 employees purchased homes with the down payment assistance, 11 of whom received matching funds from the state.

How to Create and Implement EAH: Determine Your Company’s Needs Conduct a needs assessment Review local housing market conditions Perform an internal business analysis Employee demand for housing benefits/assistance External community relations considerations Assess your company’s unique HR needs Ongoing and anticipated recruitment challenges Retention and productivity issues How EAH would work with respect to overall benefits package

How to Create and Implement EAH: Design a Program Identify specific goals for the program, for example Increasing employee homeownership and workforce stability Recruiting and/or relocating employees Reducing commute times to improve morale and to decrease absenteeism and tardiness Revitalizing neighborhoods adjacent to employer’s facility Prepare the EAH business case, including factors such as: Current conditions versus desired business outcomes: gaps Turnover costs versus program costs Comparison of implementation methods: internal versus third-party administrator

How to Create and Implement EAH: Design a Program Determine EAH offerings Homebuyer assistance Financial assistance Homeownership education and counseling Rental assistance Search assistance New construction projects Renovation assistance Assistance to at-risk homeowners in current environment

How to Create and Implement EAH: Design a Program Establish Employee Eligibility Criteria can include: Employee or household income limits First-time homebuyers only Duration of tenure with company Personal financial resources to be provided by employee Location of housing to be assisted (e.g., near workplace, in revitalization area)

How to Create and Implement EAH: Design a Program Establish Employee Eligibility Important considerations Amount company is able to allocate to the program Fairness across workforce Business goals of program Administrative capacity (internal and/or external)

How to Create and Implement EAH: Implementation Establish budget and timeline Determine administration methods: internal administration and/or outsourcing program elements to a third-party partner An important consideration is ensuring employee privacy Potential partners include nonprofit housing organizations, banks, local governments, housing trust funds, and local governments

How to Create and Implement EAH: Implementation Marketing Internal marketing is absolutely critical to the success of an EAH program Educate employees about the new opportunities available to them at the start Conduct ongoing marketing to ensure lasting participation Consider external marketing if goals include community revitalization and use of program as a recruitment tool

How to Create and Implement EAH: Implementation EAH Program Assessment In order to understand your program’s effectiveness in meeting its goals, regular evaluation of the program is essential Your needs assessment will provide baseline indicators against which to measure progress and return on investment Surveys of participating and nonparticipating employees are useful tools Adjust your program as your market and business needs evolve

How to Create and Implement EAH: Implementation Tax Considerations Federal income tax treatment depends on type of assistance employer provides Direct payments to employees (e.g., down payment, closing cost, or rental assistance) or payments to a third party partner on behalf of an employee are treated as compensation For loans, loan guarantees, and mortgage assistance (interest write-downs), foregone interest and forgiven loan amounts are treated as compensation, taxable for the employee Rules do not generally apply to below-market or interest free loans up to $10,000

How to Create and Implement EAH: Implementation ERISA Considerations In most instances, EAH programs are subject to ERISA only if funded through a trust fund or other arrangement in which financial assistance is not made from the employer’s general assets If sponsored by a governmental entity or church, the program is exempt Consultation with tax advisers prior to implementation is important

How to Create and Implement EAH: Implementation State and federal legislation that can help Existing and pending legislation in 15 states supports EAH through tax credits and other incentives For example, Illinois provides employers with state tax credits of $.50/$1for qualified affordable housing investments The Housing America’s Workforce Act (S1078 and HR1850) was introduced in 2007 Provides a 50% federal tax credit to employers for home purchase and rental benefits to their low and moderate-income employees Includes housing as a tax-free employee benefit, such as healthcare Establishes a competitive grant program available to nonprofit organizations to provide EAH program administration, technical assistance, and counseling

Homes For Working Families Other Resources Increasing the Availability of Affordable Homes Understanding Employer-Assisted Housing Analyzing Affordability in Metropolitan Housing Markets: An Examination of Affordability for Middle-Income Households, Moody’s Economy.com research commissioned by Homes for Working Families Share Your Story Web forum Public opinion and topical research www.homesforworkingfamilies.org