Should employers help workers with high housing costs?

Looking to rent a two-bedroom apartment in Vancouver? That’ll set you back more than $3,000 a month, according to recent reports.

If it’s time to buy, recent figures put the price of the average detached house in the Vancouver area at a cool $1.6 million. Understandably, many people can’t make those prices work, which can create issues for Vancouver employers trying to recruit top candidates.

With the recruitment challenge in mind, the University of British Columbia has several programs in place to help employees with housing. For example, it offers 511 apartments and townhouses on its Vancouver campus to certain employees for 25 per cent below market rates. Depending on the size, a two-bedroom apartment would go for about $1,900.

Read: Starbucks expands housing, sabbatical benefits to Chinese employees

Employees willing to live in older buildings across town could find cheaper rents, but many staff members want to live near where they work. “So if somebody has to get on the bus and commute for an hour or an hour and a half, that’s going to affect your retention,” says Lisa Colby, the university’s managing director of faculty staff housing and relocation services. “That’s going to affect your employee engagement and their life satisfaction.”

In Canada, employer-subsidized housing for permanent urban employees is quite rare, says Gord Frost, career business leader at Mercer. It’s not unusual for companies to give housing allowances to staff members who are relocating for work. It’s also common for organizations with field projects in remote areas to provide on-site accommodation. But there isn’t a strong tax incentive for employers to offer a housing benefit to regular employees, he says.

Instead, if an employer is struggling to recruit candidates to Vancouver, Toronto or another expensive city, Frost suggests increasing their salary. “Ultimately, our advice is you still want to provide a compensation package that’s competitive overall,” he says. “And if you were to provide some sort of a housing allowance, that wouldn’t be any more or less tax-effective than paying them an additional base salary, for instance.”

The 30% rule

UBC, however, wanted to separate salary from housing support. “What if the housing market later cooled? Would we then lower the salary? No, that would be difficult,” says Colby.

“So it’s best to keep salaries based on job descriptions and deal with the housing support needs separately, in a targeted program that’s designed for those people who are affected and that’s in line with our strategic recruitment and retention priorities.”

Read: Housing costs, not avocado toast, to blame for millennials’ retirement struggles

That flexibility also allows UBC to try new housing solutions. Next year, for example, the university will launch a rent-geared-to-income pilot program for 100 staff and junior faculty members. If an employee’s annual household earnings are less than a set amount — $99,500 for faculty and $64,500 for staff — the university would set the person’s rent at 30 per cent of total income.

The faculty program is for parents relocating from outside British Columbia’s Lower Mainland. Colby anticipates it will take three years to convert 100 units to the plan, noting it’s important not to move too quickly and displace staff living in discounted, but not geared-to-income, apartments. After that time, the university will re-evaluate the project.

Outside Canada, it’s more common for employers, especially universities, hospitals and technology companies, to help with housing. In addition to recruiting and retaining staff in expensive cities, housing benefits can help employee engagement at organizations in disadvantaged neighbourhoods, says Jeffrey Lubell, director of housing and community initiatives at research firm Abt Associates Inc. in Cambridge, Mass.

Read: How do Canadian executives see the future of pensions and benefits?

Consider Newark, N.J.-based audiobook production company Audible Inc. “While it’s fairly close to New York City, [Newark] is a community that’s struggled and it has not necessarily been one that is as attractive as certain New York neighbourhoods to . . . higher-income households,” says Lubell.

So Audible offered its employees a variety of financial incentives to move to Newark. According to the New York Times, 20 employees, chosen through a lottery, would receive a year of rent support to live in a building that’s a 10-minute walk from the office. And any Audible employee who moves to Newark receives a monthly US$250 rent subsidy for a year.

Building versus buying

Besides shorter commutes, investing in neighbourhoods through housing subsidies can lead to lower crime rates and more amenities for workers. That way, the company will “benefit the existing residents, as well as [itself], by making the neighbourhood a more pleasant place to be and to work in,” says Lubell.

He notes, however, that an employer’s housing strategy should depend on local conditions. For organizations in communities where housing is cheap, it makes sense to simply subsidize employees’ rent payments or provide assistance with down payments. “You’re not necessarily going to have a big effect on the overall affordability,” says Lubell.

But in hot real estate markets, that kind of institutional support may lead to rapid gentrification, and non-employee residents may no longer be able to afford their homes. In those cases, Lubell encourages employers to add to the local housing supply. Facebook Inc., for example, is developing “an integrated, mixed-use village,” according to its blog. The development will include 1,500 residential units for both employees and other residents of Menlo Park, Calif., of which 15 per cent will be available at below-market rents.

Read: Facebook HR changes inspire Toronto company to reconsider leave policies

As for UBC, it’s building 175 new units next year, some of which will be for the rent-geared-to-income program and some of which will be available at 25 per cent below market rates. It also offers assistance to prospective homeowners. Through its home ownership plan, for example, it provides a $50,000 forgivable loan to help professors and certain staff members with their down payments. The homes can be anywhere in the greater Vancouver area and they must be the employee’s main residence and only property. The program is open to those in eligible positions who have been at the university for less than 10 years.

“Sometimes, faculty members want to see if they get tenure before they commit to the city and staying and buying a home,” says Colby. “We have to make sure if they want to buy earlier, they can. But if they want to see if they get tenure, there’s time within the program for them to do that.”

UBC, using money from its endowment fund, also offers loans at prescribed interest rates to certain faculty members. They receive up to $250,000 to buy a home and pay annual interest at the Canada Revenue Agency’s prescribed rate, which is currently one per cent. The faculty member doesn’t have to repay the principal for 15 years.

Read: What should institutional investors expect from real estate in 2017?

All faculty members can apply for the mortgage assistance program, but the prescribed interest rate and the rent-geared-to-income options are limited and much more competitive, says Colby. The provost’s office selects which professors receive the housing help based on their academic recruitment and retention value. Staff members are eligible for the rental programs and apply through a lottery.

“We can never solve the Vancouver housing market,” says Colby. “All we can do is mitigate the situation. And we have to do what’s appropriate within our resources as an employer but we can take the edge off it.”

Sara Tatelman is a Toronto-based freelance writer.

Get a PDF of this article.