Employer Assisted Housing: Providing Tax Incentives for Employers
Congressional Briefing - February 21, 2006
EAH Case Study
Joseph Corporation - Employer Assisted Housing Program
OUTCOME: Joseph Corporation of Aurora, Illinois, provides counseling services to organizations and businesses offering employer-assisted housing (EAH) programs.
BACKGROUND
Joseph Corporation was formed in 1991 to address affordable housing needs in and around the city of Aurora. The agency’s mission is to empower individuals, stabilize households and revitalize neighborhoods through a variety of economic and social initiatives. Its services and programs include multifamily development, homeownership education and counseling, and home rehabilitation.
Joseph Corporation offers employer-assisted housing as part of its existing homeownership education program. Through EAH programs, businesses offer financial assistance to eligible employees to help them purchase a home. The funds are used for down payment or closing costs, and typically involve conditions such as a satisfactory employment record, income and geographic limitations, and counseling from a housing organization. As an employee benefit, EAH programs help employers attract and retain employees while helping individual households build assets.
COMPONENTS
Program Development. In Illinois, EAH has been promoted by a local regional planning organization, the Metropolitan Planning Council (MPC) of Chicago, that conducts research, planning and education on issues of local importance. MPC research revealed that many employees at local corporations could not afford to live where they worked. Based on this finding, MPC developed a framework for EAH programs and helped market the concept in the region.
In 1999, Pittway Corporation’s System Sensor plant became the first business to offer an EAH program in cooperation with Joseph Corporation. Before implementing the program, a survey was conducted to determine employee interest and housing needs. In 2000, Pittway began marketing the program within the company, then referring employees to Joseph Corporation for homeownership counseling. Sixteen employees successfully purchased a home through the program during its first year.
System Sensor has since been purchased by Honeywell, but the EAH program continues as first established. Joseph Corporation also conducts an EAH program with the city of St. Charles.
EAH Specifics. Each year, System Sensor allocates a set amount of funds for its EAH program. The department of human resources verifies eligibility, completes a “client intake form,” then refers the potential buyer to Joseph Corporation. Program requirements include satisfactory employment for one year, home purchase within 15 miles of the plant, and household income at or below 120 percent of the area median. The buyer must also be able to invest from their own funds the greater of $1,000 or 1 percent of the purchase price.
Eligible buyers receive $5,000 for down payment or closing costs in the form of a zero-percent forgivable loan. Over the course of five years, 1/60th (or 1.67 percent) of the loan is forgiven each month. During this period, the employee must maintain the home as his or her primary residence and remain successfully employed at the business. If the employee relinquishes ownership or leaves the company, the unpaid balance must be repaid. If the employee is laid-off, they still are entitled to the loan.
The EAH program through the city of St. Charles began in 2003. The loan specifics and eligibility factors are similar to System Sensor’s, but the city program is limited to three employees a year and has different income requirements.
Joseph Corporation’s Role. Joseph Corporation guides each referred employee through the homebuying process. Individual counseling includes information on credit and budgeting, obtaining a mortgage, working with real estate professionals, and responsible homeownership. Joseph Corporation is also responsible for placing the $5,000 down-payment assistance check into an escrow account and attending the closing.
Marketing. Programs typically are launched through large informational events at the company, with help from Joseph Corporation. Ongoing outreach activities include paycheck inserts and lunchroom information tables staffed by Joseph Corporation employees.
Staffing. Joseph Corporation’s director of homeownership education performs all the counseling and education components for the EAH programs. Approximately 17 percent of her time is spent with program referrals.
Costs and Funding. The main cost is staffing. Joseph Corporation estimates the staffing cost per buyer at about $1,000. Additional costs include materials, filing requirements, and mailings. Both participating employers contribute to Joseph Corporation’s general operating budget to help fund the program. System Sensor contributed $20,000 in 2003 and $25,000 in 2004, payable quarterly. The city of St. Charles pays $1,000 per employee served, which is paid at closing.
RESULTS
EAH programs offer benefits to all entities involved. In addition to increasing employee retention and promoting the company’s image in the community, EAH also can be designed to serve specific needs, such as neighborhood redevelopment. EAH programs can generate income for NeighborWorks® organizations and increases the number of new homebuyers.
Since the partnership began, System Sensor and Joseph Corporation have created 53 new homeowners (through 129 referrals). Since 2003, three new homeowners have been created through the city of St. Charles.
Because of successful EAH programs in the state, Illinois now provides tax credits to companies offering EAH programs (50 cents for every dollar invested). This is a strong incentive for businesses to offer EAH programs.
For more information:
Jerria Donelson, Executive Director
Joseph Corporation
P.O. Box 525
32 South Broadway
Aurora, IL 60507
(630) 906-9400
Fax: (630) 906-9406
E-mail:
mary@josephcorp.org
Web:
www.josephcorporation.org
