Employer Assisted Housing: Providing Tax Incentives for Employers
Congressional Briefing - February 21, 2006
EAH Case Study
Neighborhood Housing Services of Chicago - Employer-Assisted Housing Program
OUTCOME: Neighborhood Housing Services of Chicago has established successful employer-assisted housing programs with several local employers, including Bank One and the University of Chicago, to promote home ownership for their workforces.
BACKGROUND
Formed in 1975, NHS of Chicago brings about community reinvestment through a partnership of residents, business and government. NHS programs are organized around four major areas of activity: 1) community building, through 10 neighborhood-based programs; 2) neighborhood lending, through Neighborhood Lending Services (the lending arm of NHS and an Illinois residential mortgage licensee), which administers loan programs that finance home improvement, purchase, and rehabilitation by directly lending to low- and moderate-income families; 3) real-estate development, through the NHS Redevelopment Corporation, which buys and redevelops single- and multifamily properties and builds new homes; and 4) home-ownership development through the NeighborWorks HomeOwnership Center® and neighborhood programs, including educational programs and one-on-one counseling
NHS began working with employers in the city of Chicago in late 2001 to create an employer-assisted housing (EAH) program.
COMPONENTS
Employer-Assisted Housing. NHS’s employer-assisted housing program is based on a successful program originally developed by a partnership among the Metropolitan Planning Council (MPC), a nonprofit organization of planners that examines regional issues affecting low- and moderate-income households, the Joseph Corporation, a NeighborWorks® organization in Aurora, Illinois, and an Aurora company, System Sensor.
Through this program and their research, MPC and System Sensor determined that providing home-ownership assistance as an employee benefit had positive financial benefits for all involved. When a company hires an employee who later leaves the job or misses work due to commuting issues, the company loses money. Several factors affect those who commute: Workdays are missed due to inclement weather, and parents of school-aged children tend to take off a whole day when their child has a half-day at school. The results are lost productivity and increased costs for the employer.
Additionally, once an employee quits or is discharged, the company needs to absorb the cost of hiring and training another individual. MPC’s research and System Sensor’s experience proved that the cost of helping an employee purchase a home is less than the cost of missed days at work and hiring and training new employees, as long as the employee makes a commitment to remain with the employer for several years.
Bethany Hospital. Based on the successful effort in Aurora, MPC expanded its focus to include other potential employers in Chicago and the surrounding suburban areas. One was Bethany Hospital on Chicago’s west side. A hospital board member also was a member of the NHS’s board and made a connection between MPC’s efforts and NHS’s home-ownership program.
In early 2002, NHS and the hospital began a two-year EAH program. Bethany Hospital was able to commit funds to provide five forgivable loans of $5,000 a year to employees to use as down-payment assistance. Eligibility for the program required a one-year satisfactory employment history, employee savings equal to a 1 percent down payment, purchase of a home in the neighborhood areas surrounding the hospital (an approximately half-mile radius), and completion of the NHS homebuyer education program.
Loans were forgiven over a five-year period, provided the employee remained at the hospital and occupied the home as his or her principal residence. There are no income restrictions, but employees with household incomes at or below 80 percent of the area median income can qualify for an additional $2,500 of forgivable loans from an Illinois Housing Development Authority (IHDA) program.
University of Chicago/University Hospital. The University of Chicago and University of Chicago Hospital were also involved with and impressed by the research conducted by MPC. The university and hospital are located in Chicago’s Hyde Park neighborhood and have a combined employee population of more than 12,000. Only about 30 percent are homeowners in the neighborhoods surrounding the campus and hospital.
The university and hospital wanted to encourage their staff to become homeowners in five areas surrounding the university and hospital, and in 2003, partnered with NHS, MPC and the city of Chicago’s Department of Housing to provide forgivable loans to employees to purchase homes in these neighborhoods.
The university and hospital both committed to fund the program for two years. The university provides forgivable loans of $7,500 for 35 employees each year, and the hospital will provide the same to 20 of its employees. Borrowers do not need to be first-time buyers, but need to be at or below 120 percent of the area median ($90,500 or less for a family of four). Additionally, buyers need to purchase a home in the targeted areas surrounding the university and hospital. An employee needs to have worked for the university or hospital for one year. The forgiveness period is five years, during which time the employee must remain employed with the university or hospital and continue to occupy the home as his or her principal residence.
Other Employers. NHS also is engaged in EAH programs with Bank One and the National Interfaith Committee for Worker Justice, a nonprofit on Chicago’s north side. In both, NHS provides homebuyer education and processes the applicants for forgivable loans using IHDA’s program.
Marketing. Program marketing is conducted through each employer. The University of Chicago published an article in the university newspaper that goes to all university and hospital employees, and included notices about the program in employee pay envelopes. NHS conducted orientation sessions on-site to introduce and explain the program to employees. Press releases were sent to a variety of media, with coverage in one of the metropolitan daily newspapers and local community newspapers. The University of Chicago and the University Hospital created a packet of brochures and information that was sent to each of the 4,000 employees living outside the target area but within the eligible income bracket.
Program Process. Persons interested in the program through the university or the hospital contact the University Housing Center, a housing referral program on campus. The staff at the University Housing Center explain the parameters of the program and determine employee eligibility. Those who are eligible are then referred to NHS for one-on-one counseling and NHS’s homebuyer education classes.
Homebuyer Classes. NHS holds homebuyer classes on campus for the university and hospital employees. Employees can attend classes on campus or at any of the four other locations where NHS offers classes. The class curriculum contains four separate two-hour sessions, “Orientation to the Home Purchase Process,” “Budget & Credit,” “Shopping for a Home,” and “Getting the Deal Done.” Participants also have the opportunity for one-on-one consultation with an NHS homebuyer consultant, and can be pre-approved for financing through NHS’s nonprofit mortgage lender, Neighborhood Lending Services.
Lending Options. Eligible buyers may apply for a loan through NHS or they may select another lending partner. One lender with a branch on the university campus created a loan package for EAH participants that offers a lower interest rate and lower fees. Through NHS’s partnership with 30 different lending institutions, there are a variety of options available. The program requires that the buyer’s financing meet certain rate and fee guidelines and that each property be inspected either by NHS’s construction specialist or an independent inspector. NHS staff review each participant’s loan commitment to ensure that the buyer is getting a good loan and not being taken advantage of by a predatory lender.
Outreach Meetings. NHS met with employer partners a number of times during the development of the program. On an ongoing basis, the participating businesses meet every other month (or as needed) to discuss program progress or issues.
Staffing. NHS hired a full-time staff person who has primary responsibility to deliver the EAH program to the university and hospital employees. This person teaches the homebuyer classes on campus, conducts one-on-one counseling, and facilitates the loan process for each buyer. The remaining employees in NHS’s home-ownership department deliver the other EAH programs as well as NHS’s overall home-ownership program.
Cost. The university and hospital committed a combined $95,000 a year for the two-year program, in addition to the forgivable loan funds. This funding covers NHS’s staffing costs, program and fiscal administration, and program materials. Any additional program costs are subsumed in the operating budget for the NHS home-ownership program.
RESULTS
The program with the university and university hospital began in May 2003. By the end of August, 113 employees had applied for the program and 11 had closed on their new homes with EAH assistance. Six additional home purchases were scheduled for September. The University Housing Center initially received more than 100 calls a day. While the first wave of applicants included a high percentage of “ready” buyers, the more recent applicants involve a much higher percentage of employees who needed additional time and preparation to achieve home ownership.
Three of the five committed down-payment assistance loans have been granted through Bethany Hospital. The Bank One program has successfully met its first-year goal of five new homeowners, and the National Interfaith Committee for Worker Justice program is in its beginning stages.
Overall, NHS has received positive feedback regarding the EAH programs. Some employees are having to work harder than others to achieve home ownership, but most are surprised and happy with the options available.
For more information:
Brenda Grauer, Director of Home Ownership Services
NHS of Chicago
1279 N. Milwaukee Ave., Fifth Floor
Chicago, IL 60622
(773) 329-4010
Fax: (773) 329-4120
E-mail:
bgrauer@nhschicago.org
