Companies kick in cash to help employees become homeowners
Ben Clark's job as a field technician for a south suburban engineering firm
comes with some perks he likes: an annual bonus, company softball games and golf
outings and lots of collegiality at assorted corporate team meetings. But he
says one perk stands above all the rest as a sign of his bosses' faith in his
abilities and his future at the company. Last September his employer, Robinson
Engineering, kicked in $5,000--at no cost to him--so he could buy his first
"All I have to do is stay at the company for five years after my closing
date," says Clark, 21, who bought a one-bedroom condominium in Glenwood. "It's a
great thing they did, showing me they appreciate my effort as part of the team
and they're really considering how I make out in life."
That show of support is a two-way street, according to Chris King, president
of South Holland-based Robinson. "It's a commitment from us to the employee, and
from the employee back to us," King says. The cost of finding and training new
civil-engineering employees is steep, he says. By forging a long-term bond with
Clark , the company avoids the high price of putting a replacement in his slot.
In the past four years, Robinson has made $5,000 housing loans to four
employees, each with the stipulation that the amount will be forgiven if the
employee stays on for five years.
"They're all still here," King says. "That's good for us because we're in a
growth period, so turnover is not something we want to worry about. As a firm,
we structure pretty high in our benefits to try and encourage employees to stay;
that $5,000 loan is one more incentive."
Robinson Engineering isn't the only company using forgivable housing loans as
a spur for employee loyalty. Since 2000, at least 20 Chicago
employers--including corporations, hospitals, municipalities and the public
schools--have set up employer-assisted housing, or EAH, programs to help low-
and middle-income employees afford homeownership.
While application time varies by plan and employer, some programs take only a
few weeks more than a standard mortgage. That doesn't include credit counseling
or other prep work the counselors determine that applicants need.
And if employees leave, loans are called in full. That's why employers say
they are careful to recommend only those with good work records. But they also
say it works both ways; having secured this lower-cost financing via your
employer, you are likely to work harder to keep your job.
About 250 Illinois home buyers have relied on the boost from an EAH program,
according to Robin Snyderman, housing director for the Metropolitan
Planning Council. At least three times that number have gotten help
straightening out their credit and otherwise planning for homeownership through
the confidential counseling that most EAH programs include, she says.
Snyderman and others backing EAH programs expect those numbers to climb
rapidly in the next few years, as more employers find out what a sweet deal an
EAH can be.
"I don't know that there are any pitfalls," King says. "It's win-win." Along
with the payoff in worker loyalty and reduced training costs, his firm can get a
tax credit from Illinois equal to half what it spends on the EAH program.
But even without that credit, the first Illinois company to set up a
forgivable housing loan program appears to have made back every penny it has
System Sensor, a St. Charles firm that makes smoke detectors for commercial
and industrial use, worked with the Metropolitan Planning
Council to launch a pilot EAH in the beginning of 2000. Twenty
employees each got $5,000 in housing assistance the first year, and according to
Dick Braun, the company's director of human resources, "we saved about $100,000
in turnover and costs to fill positions, so we broke even on it." The same has
been true in subsequent years, he says. About 60 System Sensor employees have
bought homes using forgivable loans from the company.
Like King, Braun says there is no evident downside to setting up an EAH
program--not even for employees, who might cynically believe a forgivable loan
comes with some sort of paternalistic strings attached. That possibility
disappears when the employer establishes its program through an independent
housing-assistance corporation, an agency whose expertise lies in counseling
low- and moderate-income on how to become credit-worthy in the eyes of home
lenders. (System Sensor works through Joseph Corp. in Aurora .) Counseling is
confidential and not something that the employer has any access to or influence
In fact, Snyderman says the outside counseling agencies sometimes make the
deal even better for a potential home buyer, because they know about other
programs that can help the buyer on top of what the employer does.
Through an Illinois Housing Development Authority program, for instance, a
buyer with a household income less than 50 percent of the area's median can
qualify for another $5,000 from the state on top of the EAH funds. For aspiring
home buyers whose jobs are in relatively pricey neighborhoods, "$5,000 from your
employer doesn't bridge the gap to homeownership," she says, "but double that
and it makes a big difference."
Clark benefited first from the counseling. "I was living with family in
Harvey and didn't think it was possible I could buy a place on my own," he says,
"but they helped me figure out what I needed to do to get myself ready to buy my
first home." Next he took advantage of the money, without which, he says, "I
definitely couldn't have done it."
There's a third party benefiting from Clark 's purchase of a home in
Glenwood, says King, the company president. That would be Glenwood. Robinson
Engineering is the municipal engineering staff for the southern suburb and at
least 37 other towns in the Chicago area and Northwest Indiana . The company's
EAH requires borrowers to live in one of its client towns.
"It helps the towns see that we have a vested interest in their community,
our people are involved there," King says.
Other employers use an EAH to achieve some other goal. Charter One Bank, for
example, makes $5,000 forgivable loans available to employees, but pushes the
upper limit to $8,000 for a borrower who buys in a neighborhood the U.S. Census
identifies as "emerging" (a low- to moderate-income area), the better to help
improve those neighborhoods. And some 15 of the 96 hospitals in the eight-county
metropolitan area have EAH programs in place as one facet of their attempt to
ease the shortage of skilled healthcare workers, says Scott Ziomek, director of
government relations for the Metropolitan Chicago Healthcare Council.
At System Sensor, borrowers can get a forgivable loan only if they buy a
house within 15 miles of the plant, or, if they live within that distance, they
buy a house that's closer to the plant. The idea is to help workers reduce their
commute time, Braun says. "When commuting time is less, attendance at work is
greater and you can spend more time at home with your family," he notes. "If you
have bad weather and you live far from work, it's sometimes easier to call in
for a sick day, but if you live nearby, you'll come in."
The EAH and other incentives have helped reduce worker absenteeism at System
Sensor from 16 percent to less than 5 percent, Braun says. But it's not only
about getting people to come to work, it's also about making it possible for
people with modest incomes to live where the jobs are. In the 1990s, the
distance between the Chicago-area's job centers and its affordable housing grew,
MPC's Snyderman says. That means longer commutes, more traffic and greater
detachment from the workplace.
It also threatened to isolate System Sensor from the pool of labor, according
to King Harris, who owned the company through his firm Pittway Corp. at the time
the EAH was getting started. (He has since sold Pittway to Honeywell.) In the
mid-1990s, Harris says, "we were having trouble attracting enough employees to
meet our production needs. We ended up setting up a twin plant in Juarez ,
Mexico , because labor is plentiful there."
When MPC's Snyderman approached Harris, who is involved with the group, about
launching a pilot EAH program, he says, "this looked like a way where we in the
business sector could take some leadership in attracting the workforce to where
we are building our plants, instead of just asking political leaders what
they're going to do about it."
So System Sensor's EAH program started up because the boss, Harris, wanted
one. But Braun says it has survived because it works. To hourly workers, "the
company can seem like we're just the money-makers, and all we want is to have
these people come work for us," he says. "But a program like EAH shows them
we're interested not only in what they do for us but their family life--that we
want them to be able to buy a home."