Housing Assistance: A Growing Fringe Benefit for Employers

In today’s competitive job market, employers are not questioning if they should offer fringe benefits but rather which ones to choose. Beyond the essentials like health insurance and retirement plans, organizations are beginning to explore innovative options to enhance their benefits packages. One option gaining traction is housing assistance.

Diverse Arrangements

Employer-sponsored housing assistance can take several forms, including:

• Loan Programs: These allow employees to borrow a specified amount for down payments, closing costs, or mortgage payments. Some employers even offer loan forgiveness if employees remain in their homes and at their jobs for a predetermined period. To enhance their employer brand, many organizations may limit this benefit to housing located in the community where they operate.
• Rental Assistance: Employers might provide one-time subsidies to help cover security deposits or offer monthly stipends to assist with rent. Additionally, some employers can issue letters of credit to help employees secure rental housing more easily.
• Real Estate Development: In rare instances, larger organizations may develop housing specifically to rent to employees. Some major companies are even constructing properties to sell primarily, though not exclusively, to their workforce. While this approach may not be feasible for most employers, it’s worth considering the potential advantages and drawbacks.

Purpose and Considerations

The increasing interest in employer-sponsored housing assistance is a response to a pressing need among many U.S. workers. Many economic experts describe the current housing market as a crisis marked by rising costs and limited availability. Just as health insurance helps employees manage healthcare expenses and retirement plans facilitate future savings, housing assistance can alleviate concerns about securing stable housing, enabling employees to focus on being engaged and productive.

In January 2024, JW Surety Bonds conducted a survey involving 710 employees and 310 employers. The results revealed that one in four employers was considering offering housing assistance as a fringe benefit this year. While it remains unclear how many followed through, employee responses are noteworthy:

• 13% reported receiving some form of employer-sponsored housing assistance,
• 33% indicated a preference for housing benefits over salary increases, and
• 41% expressed willingness to change jobs for an employer providing housing assistance.

These statistics suggest that housing assistance could be a valuable addition for organizations looking to attract talent and improve employee retention.

However, before implementing housing assistance, it's crucial to ensure that your employees value and will utilize this benefit. If the interest is low, the resources invested in developing and launching such a program may go to waste. Additionally, it’s important to carefully evaluate the cash flow impact of offering loans or stipends.

From a tax perspective, most forms of employer-sponsored housing assistance are typically considered taxable fringe benefits. This means employees must report the value of the benefits received as income to the IRS, which will also be subject to employment taxes. However, there can be exceptions based on specific circumstances.

A Strategy Worth Exploring

Could housing assistance be a smart addition to your organization’s benefits portfolio? We can assist you in exploring this strategy, including assessing the cash flow impact and understanding potential tax implications at federal, state, and local levels.