Home Work: Business is deciding it's good policy to help employees buy their own homes
Even as mortgage rates fell, Kerry Jantzen gave little thought to buying his own home. That was before he learned that his employer, Chicago-based Bank One, where he had worked for more than seven years, was offering $2,500 plus the cash to cover the taxes on that gift as a way to help its workers buy homes.
The offer was too good to pass up. Last year, Jantzen used his employer’s grant, along with about $2,500 of his own savings, to trade in his white-walled rental for a one-bedroom condominium in Chicago’s Gold Coast neighborhood. Ownership freed him to personalize his living space for the first time; he painted the condo’s walls various shades of the sunset. Jantzen, now living 14 blocks from his office, says he feels more secure about his home and his work life.
“It shows you that [an employer is] willing to make a little more investment in you,” says Jantzen, who has lowered his monthly housing payment by $100 thanks to the move. “It’s a good feeling.”
Bank One, which extends its nearly two-year-old program nationwide, is one of a growing number of Illinois-based companies that have rolled out employer-assisted housing offers in recent years. And housing advocates say this increased interest is thanks in part to a new statewide tax-credit incentive. In 2001, then-Gov. George Ryan signed legislation that set aside $2 million annually to reimburse employers 50 cents for each dollar of housing assistance they provide. That same year, the state agreed to match up to $5,000 of employers’ assistance provided through programs affiliated with certain northeastern Illinois housing advocacy groups.
“It’s very impressive that Illinois has been a leader in this,” says Beth Marcus, a director at the national community lending center of the Washington, D.C-based housing lender Fannie Mae. That company, which has extended an employer-assisted housing benefit to some 3,000 of its own employees since 1991, also launched an initiative in 2000 to help employers throughout the nation establish the housing benefit. Fannie Mae has worked with more than 500 employers so far and aims to reach out to 1,000 by 2010, Marcus says. She says interest is on the rise nationwide, despite high unemployment, because employers see the program as more than a recruitment tool.
Of course, employer-assisted housing is not a wholly new concept. Many universities, including the University of Chicago and Loyola University in Illinois, and some hospitals historically have used housing assistance to attract employees, says Samantha DeKoven, a housing associate at the Metropolitan Planning Council in Chicago, which has been instrumental in encouraging northeastern Illinois employers to participate. But there’s now a greater range of employers getting involved, says DeKoven. These include Bank One, Medela Inc., the breastpump manufacturer in McHenry, such health care organizations as Advocate Bethany Hospital on Chicago’s West Side and municipalities such as suburban Riverdale and Rock Island.
“The tax credit has really moved the whole discussion about employer assisted housing forward in a big way,” says DeKoven, whose group promotes planning and development policies. “There’s a whole range of companies that have started to see that housing is really an issue. And with these incentives, they’re seeing an opportunity to do something that is not cost prohibitive.”
Such programs vary greatly in design. Some use employer grants with few restrictions that never need to be paid back. Others use so-called forgivable loans, which are either erased from the books in five years or paid back if the worker leaves the company earlier. Typically there are income limits, which govern who is eligible. And such programs are not usually targeted at executives. Most are designed to encourage workers to live near work, strengthen communities, increase employee retention and reduce absenteeism.
“It’s more of a retention tool,” says Dick Braun, director of human resources at System Sensor in St. Charles, a division of Honeywell, which has helped 38 employees buy homes since 1999. “If someone was looking at the fact that the company helped them buy a house, it makes them think twice about leaving.”
The Metropolitan Planning Council, a policy and advocacy group led by business and civic leaders in the Chicago region, used System Sensor as a model when it approached state officials with the suggestion that they find a way to leverage the private sector investment, DeKoven says.
Under System Sensor’s program, Braun says, recipients receive up to $5,000 in a forgivable loan to buy homes within a 15-mile radius of the plant. The workers’ household income must be at or below the median for the area, as defined by the U.S. Department of Housing and Urban Development. In St. Charles that amounts to about $74,500 for a family of four.
The initiative has worked, Braun says, because System Sensor outsourced much of the administrative work to Joseph Corporation, a community-based nonprofit in Aurora that focuses on home ownership, lending and real estate development in Kane County. Joseph Corporation provides home-buying counseling and helps workers get prepared for closing on the home.
One of the more creative projects to develop out of the state initiative is Live & Work Rock Island. The Rock Island Economic Growth Corp. raised $500,000 in private donations and then leveraged that for $250,000 in state tax credits. The economic development group then sold the tax credits, says Kristi Ramirez, that group’s housing director. It expects to provide about 35 employees of various Rock Island-area employers with down payments of up to 5 percent of the purchase price of a house minus $500 from the qualified buyer. It also will provide up to $2,000 for closing costs and one year of homeowner’s insurance.
Still, the future growth of employer-assisted housing is uncertain, given the difficult economy, which has left some employers struggling to maintain existing benefits and leery of adding new ones.
Julie Biel Claussen, executive director of the Corporation for Affordable Homes of McHenry County, which has successfully worked with two employers to set up programs, says one interested company backed off once it appeared it might have to lay off workers.
“They were concerned that employees would say, ‘What’s going on here? You’re throwing money at this at the same time you’re laying people off,’” Claussen says.
At the same time, there’s only a few years left to prove there’s enough demand for the tax credit. Charlotte Flickinger, director of tax credits at the Illinois Housing Development Authority, says the agency approved applications to use $60,800 in tax credits to fund the purchase of about 30 homes in fiscal year 2002. That number rose to $225,000 in tax credits for 35 homes in fiscal year 2003, but requests are running far below the available funds. And the initiative is scheduled to sunset in just three years.
“I’m really hoping that by the time we get to the end of this pilot period we’re able to show the General Assembly that we’re oversubscribing the program,” Flickinger says. “It’s great the state stepped up, but we’ve got to keep it.”
Legislators who support the concept are hopeful that it will catch on. Illinois Rep. Julie Hamos, chair of the committee on housing and urban development, views the tax credit as an essential budget item, even in the state’s current fiscal crisis. The program is a smart way to promote economic development, the Evanston Democrat says, because it helps employers who can’t find workers who are able to afford housing near their jobs. But it may take some time for employers to realize the advantages, she says. “This is still a novel idea.” Employees, too, may need some time to get up to speed.
Marco Leone, a 23-year-old public works employee for the city of Rock Island, heard about Live & Work Rock Island nearly two months ago and was quick to apply, but says the idea of the extra paperwork intimidates some of his colleagues.
Leone’s fast action has paid off; he plans to close in September on a $78,000 two-bedroom bungalow in the kind of family neighborhood that might otherwise have been out of his price range.
Leone’s advice to fellow eligible employees: “Ask a lot of questions, but don’t be afraid to apply.”
Maura Webber is a Chicago-based business writer who contributes regularly to the magazine. She co-authored Getting an Investing Game Plan, a personal finance book published this spring by John Wiley & Sons Inc.
Illinois Issues, September 2003