It Pays Employers to Assist With Affordable Housing

Los Angeles ranked among the “worst five cities” for affordable housing in 1987. According to a recent survey, the average price of a home here is 5.6 times higher than the average annual wage of area residents. Los Angeles’ home price/wage ratio of 5.6 to 1 dwarfs the national average (4.5 to 1) and is exceeded only by Boston, New York, San Francisco and San Diego.

The shortage of affordable housing for workers in and around Los Angeles does not just hurt families and the homeless; it hurts businesses and job growth, and threatens to undermine the economic well-being of the whole state. And national studies are now showing that unaffordable housing leads to labor shortages and wage-rate distortions in major regional economies across America.

What can responsible business leaders and public officials do about this situation? In my view, more business firms should get involved in providing housing assistance to their workers, both by establishing new cost-effective personnel benefits and by contributing to community housing partnerships. Farsighted public officials should remove existing statutory disincentives to business involvement in housing, and, further, should provide some specific new incentives for corporate housing initiatives.

More than 50 substantial employers--including Hawaii Bell, Children’s Hospital in Boston and Princeton University--have been reported as adopting cost-effective employer-assisted housing programs or plans. Colgate-Palmolive, for example, has adopted a mortgage-assistance plan that is open to any worker who has been employed for six months or longer, in which Colgate subsidizes the mortgage-loan costs on owner-occupied one- and two-family units, condominiums, home improvements and refinancings. The University of Pennsylvania has been operating a successful program for the past decade in which any of its permanent employees can receive free 100% insurance on mortgage loans that are made by Philadelphia lenders on homes in targeted neighborhoods around the campus. This mortgage guarantee lowers or eliminates down-payment requirements, fees and private mortgage-insurance costs.

There are numerous reasons why Los Angeles-area business leaders should get involved in employer-assisted housing programs: Both management and workers are increasingly dissatisfied with high levels of redundant health benefits (where overlapping spousal coverage means that firms pay for benefits that workers don’t need); new housing-related “employee benefit products” like group mortgage insurance are likely to become available very soon; major labor unions have indicated an interest in bargaining for housing benefits; housing benefits can be targeted to improve or stabilize communities located near corporate facilities; housing benefits are consistent with many corporations’ sense of social responsibility.

Federal, state and local governments can do much to encourage employer-assisted housing. The following actions seem warranted:

--Laws defining and regulating personnel benefits should specifically authorize housing benefits as permissible corporate activities. This would provide greater encouragement to corporate personnel and legal departments interested in adopting employer-assisted housing programs.

--Housing-assistance programs should be treated as tax-advantaged personnel benefits (as several other forms of personnel benefits are now treated).

--Tax codes should permit employees to make a one-time tax-free withdrawal of funds from their defined- or deferred-benefit plans if (and only if) these funds are used as a down payment on a first and primary residence.

--Corporations starting employer-assisted housing programs should be permitted to adopt employee home-ownership plans on the same tax-advantaged basis as they can now establish employee stock-ownership plans.

--State and local housing finance agencies should customize their grant and loan programs so as to encourage employers to adopt and market new housing programs.

Los Angeles-area business should get involved, and governments should encourage corporate housing activities.