- The Washington Times - Friday, April 6, 2001

It is no secret that we are in a tight labor market. Yet even with the latest layoff announcements from high-tech and Internet start-up companies, many of those recently laid off don't even make it to the jobless benefits line before finding a new job.

Employers are always looking for a new way to build employee loyalty with the latest perk or benefits package. I would suggest that they consider employer-assisted housing as a means of hanging on to valued workers. In many real estate markets, while there may be a shortage of housing inventory, there also is a shortage of down-payment money on the part of the first-time buyer.

By helping employees garner those needed dollars, employers could find themselves with a pool of workers who don't want to leave because of this added benefit they could receive from work.

Employer-assisted housing (EAH) is a very useful tool in a first-time or low-income buyer's purchasing toolbox.

Basically, it involves the employer providing a housing benefit to the employee in the form of a forgivable, deferred or repayable second loan; a grant; a matched savings plan; or a home-buyer education program that helps the employee achieve homeownership, according to Fannie Mae's employer-assisted housing publication.

Although Fannie Mae (www.fanniemae.com) began its form of EAH about 10 years ago, it has taken a tight labor pool across the country for it to become common knowledge to business owners.

Fannie Mae has a program for its own employees that offers a forgivable loan. Since its inception, more than 1,300 employees have used the program. Eligible employees must work 91 days for Fannie Mae and remain at the company an additional five years to receive full forgiveness on the EAH loan.

H. Beth Marcus, director of Fannie Mae's Community-Based Lending program, says that when the program started, about 6 percent of eligible employees took advantage of the program each year. That number has edged up to about 8 percent each year.

She says the program has helped tremendously in the company's ability to retain good employees.

"We did an analysis for the program over the last 10 years. Those who took advantage of the program had a 25 percent less turnover rate than those who didn't," she says.

Ms. Marcus says employers can find assistance on Fannie Mae's Web site about the EAH program, including a questionnaire to help them decide which program would work best for them.

Companies have several options.

• Grant. A one-time, lump sum of money given to the employee. It may have to be repaid if the employee leaves the company within a specified time period.

• Forgivable loan. The employer provides the employee with a second loan at the same time the first-trust loan is provided from a lender, which can facilitate the employer's loan to the employee. Some or all of the principal of the loan is forgiven during a specified period of time (usually several years) that the employee remains with the company.

• Deferred or repayable loan. This type loan operates much like the forgivable loan, but there is a repayment feature at some time in the future, such as when the home is sold or the employee switches companies.

• Matched savings. In much the same way that employers match employee contributions to a retirement plan, the employer matches savings by an employee for the down-payment money. The employer can either accrue the dollar amount on the company's books for an obligation to provide a grant at closing or make cash deposits (dedicated for the home purchase) into an employee's account.

• Home-buyer education. While this program may not involve actual money changing hands, just being given the knowledge of how to purchase a house could be all employees need to acquire a home. Such programs can help eliminate the mystery of the home-buying process and instruct potential buyers on what they need to do to improve credit, save for a down payment and get approved for a loan.

Various industries have worked with Fannie Mae to set up EAH programs, from the health care industry to school districts and municipal employees. Over the past 10 years, more than 250 groups have established EAH programs using Fannie Mae's help. Ms. Marcus says 31 percent of those have signed up in just the past 12 months.

Employers should keep in mind, however, that several tax issues are associated with housing benefit plans.

Typically, housing benefits are taxable to the employee and result in a commensurate tax reduction for the employer, according to Fannie Mae.

Specific treatment varies with the employer's location and type of business as well as the specifics of the EAH plan.

Fannie Mae helps organizations set up their programs with technical assistance and customer service from regional and partnership offices.

The agency identifies lender partners and provides marketing and public-relations support to their employees and local media.

For employers, the EAH provides various benefits.

• A highly effective recruitment tool.

• Reduction of training and hiring costs.

• Greater employee retention and loyalty.

• A highly cost-effective employee benefit.

• Enhanced reputation as family-friendly employer.

• Improved employee morale.

• Creation of good will toward the employer in the community.

• Community revitalization.

For the employees, the benefits are just as valuable.

• Realization of the dream of homeownership.

• Enhanced lifestyle associated with homeownership, such as greater community and school involvement and quality of life.

• Increased job satisfaction and loyalty to employer.

• Possibility of reducing commuting time.

An EAH program could be the one benefit to help employees overcome major hurdles to homeownership.

For information, visit Fannie Mae's Web site (www.fanniemae.com) and search for EAH.

Mr. Carr has written about the real estate industry for more than 12 years. Send questions and comments via e-mail ([email protected])

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