Types of Assistance

There are two main forms that EAH takes: (1) programs that help workers obtain affordable ownership or rental housing (demand-side programs); and (2) the creation of new affordable workforce housing (supply-side programs). Most EAH programs provide workers with housing counseling and forgivable loans—often of $5,000 or more—to help with the initial costs of home purchase. The loans are generally forgiven over a five-year period, reducing employee turnover.

 

Demand-Side Programs

			Philadelphia Home•Buy•Now   The city of Philadelphia's EAH program matches employer contributions dollar-for-dollar up to $3,000. Some employers contribute funds to a down-payment assistance pool that is available to their employees and other community members.   The Greater Philadelphia Urban Affairs Coalition

The most common EAH benefit is mortgage assistance, which can be structured in a number of ways:

 

• Down-payment and closing-cost assistance. Employers offer their workers loans or grants to help them overcome a key barrier to homeownership: the initial investment required to pay a down payment and closing costs on a mortgage. Loans are often low- or zero-interest and they are usually structured to be forgivable over a period of time, often five years, encouraging the employee to remain with the employer and allowing the employer to amortize the cost of the loan. Alternatively, the loan repayment can be deferred indefinitely, either until the home is resold or until the worker leaves the company. Loan amounts vary depending on the employer, but $5,000 is a typical figure. In some cases, local and state matching funds are available to increase the total amount of assistance provided.

 

• Mortgage guarantee. Employers guarantee all or a portion of an employee’s mortgage against default. Such a guarantee can enable lenders to require lower down payments, use more flexible underwriting criteria, and reduce or eliminate some closing costs or premiums. Guarantees also may eliminate the need for private mortgage insurance or reduce insurance rates. The New Jersey HOPE program uses mortgage guarantees to offer reduced cost, no-down payment mortgages to private employees statewide.

Other forms of mortgage assistance include:

 

Soft second mortgage	Lowers required down payment amounts by providing another loan for the difference between a conventional first mortgage and home purchase price.
Mortgage insurance assistance	Employer purchases mortgage insurance for a loan. Has the same benefits as a mortgage guarantee.
Individual development accounts or similar matched savings	Employers help establish and fund down-payment savings accounts, providing matching funds for savings and/or payroll deductions.
Mortgage buy-down	Cash is paid up front to lower interest rates—either temporarily or for the life of a mortgage loan.
Group mortgage origination	Lenders offer discounts on fees, interest rates, and other mortgage costs to employers who provide a stream of applicants.

 

Homebuyer education and counseling is also an indispensable part of any EAH program offering homebuying assistance. Counseling guides participants through the entire borrowing and buying process, helping them understand their options, find a lender and real estate agent, negotiate the complexities of securing a loan, choose the best affordable loan product, and understand what they are able to afford. In some cases, this counseling leads to a focus on credit repair so the employee can increase future opportunities for homeownership.

 

Less commonly offered forms of demand-side assistance include:

 

Rental assistance. In areas where rental housing is available but the cost is higher than employees can afford, employers may provide rent subsidies directly to employees, provide operating funds to a rental-property owner, or pay an employee’s security deposit. The Santa Barbara Coastal Housing Partnership, a consortium of 75 member businesses established to address high worker housing costs in the Santa Barbara, California, area, has partnered with a number of local landlords to offer reduced monthly rents for its members’ employees. Rent reductions typically range from $50 to $100 per month. Employers may also provide rental assistance by signing a master lease for multiple units in a building to then rent to its employees.

 

Credit repair and counseling. In some cases, low-income workers are not immediately eligible for most or all lending products, including those specifically designed for low-income homebuyers. EAH programs can improve employee eligibility through partnerships with organizations that provide financial literacy and credit-repair services. The Local Employment and Economic Development Council, a small business consortium serving the north branch of the Chicago River in Illinois, partners with the local nonprofit Spanish Coalition for Housing (SCH). Bilingual housing counselors from SCH assist employees with credit evaluation and repair, helping them devise a plan for future homeownership.

 

Although rental assistance and credit repair are less frequently offered than other forms of assistance, they can be valuable tools. Community groups may want to push for the inclusion of these benefits in EAH programs, since they can help ensure that assistance is beneficial to lower-income residents. Rental assistance may be helpful in areas where for-sale housing is in short supply or prices are out of reach to lower-income workers. Credit repair may help create preconditions that allow workers to benefit from other forms of assistance.

 

Business Advocacy   In addition to providing direct housing assistance, business can be a local advocate for affordable housing. The Silicon Valley Manufacturing Group (now called the Silicon Valley Leadership Group), a business consortium, was instrumental in advocating for the creation of the Santa Clara Housing Trust Fund. The SVLG also funds research on housing needs and affordable housing strategies and uses its leverage to push for more affordable housing.

Supply-Side Programs

While they are much less common, some employer-assisted housing programs help increase the supply of affordable housing in an area through strategies including:

• providing gap financing loans to developers to cover the difference between existing financing and development costs;

• leveraging credit by lending their borrowing power to developers to help them secure higher loan amounts or better interest rates;

• making direct cash or land contributions to housing development projects; and

• providing purchase guarantees to assist developers in obtaining financing by guaranteeing purchase of unsold units in new projects, encouraging development in areas where developers and lenders are reluctant to invest.

 

Employers can also participate in financing market-rate developments and use that leverage to require lower purchase prices or rents, low-income set-asides, or other equity provisions.

 

EAH Can and Should Be Combined with Other Tools

Because the levels of assistance offered by EAH are relatively low, such programs are limited in their ability to assist low- and very low-income workers, particularly when housing prices are high. EAH can be much more effective in serving the needs of low-wage workers when used in combination with other tools. Some EAH programs, such as Rochester First Homes in Minnesota, have financed land purchase for the establishment of community land trusts. Others have helped employees become owners of limited-equity co-op housing. Employers in Burlington, Vermont, contributed half of employees’ required down payments (typically $1,000 to $2,000) to purchase units in the Flynn Avenue Co-op. Half of the 28 units were designated for those earning at or below 50 percent of the median income; 13 units for those between 50 and 80 percent; and 1 unit for a household whose income is between 80 and 100 percent of median. Flynn Avenue Co-op’s success has led to the development of two other limited-equity co-ops in Burlington.

 

EAH can be combined with other tools that result in lower overall housing costs, as well as with tools such as living wages that raise workers’ income.

 

Lenders may also be encouraged to make their own contributions to EAH programs to meet CRA compliance requirements.

 

Program Design

 

Initial Assessment

The first step that communities should take when contemplating EAH is to conduct a needs assessment to understand the market conditions of the community, housing challenges faced by workers, available resources, and employer interest. Some questions to ask in such an assessment include:

• What are the housing market conditions—housing costs, availability of affordable units, market activity, and planned construction? Is the community a strong or weak housing market?

• What are the housing needs of low-income residents and workers in the community? How large is the affordability gap?

• What broader equitable development goals could a local EAH program serve? Neighborhood revitalization? Jobs/housing balance? Smart growth?

• Will the level of benefit available be sufficient to alleviate housing burdens of working families, given local housing market conditions? What is the gap between likely EAH assistance and the housing costs facing workers in different income brackets?

• Is there adequate capacity for program administration, marketing, monitoring, and evaluation to ensure success?

• Are there other tools in place that can be combined with EAH?

• 7Can the assistance be made available and useful to lower-income residents? Are there opportunities to support rental assistance, credit counseling, and affordable housing construction along with homeownership?

• Are there supportive local, state, or federal policies that employers can access? If not, what is the potential for policy advocacy to create such incentives?

There are at least seven characteristics that are likely to influence individual employers' level of interest in offering EAH and what kind of EAH strategy will appeal to each:

1. Commitment and initiative of company leaders.

2. Alignment of company mission with the strategy.

3. Industry sector.

4. Proportion of low-wage workers relative to the total workforce.

5. Company location(s) relative to housing that workers can afford and to public transportation.

6. Strength of employer connection to a given location and community.

7. Existence of a business interest in the strategy (for example, home mortgage lenders may have a particular interest in mortgage assistance).

These employer characteristics should be assessed and taken into consideration when designing programs and promoting them to different employers.

 

Design Elements

The effectiveness of EAH is heavily dependent on design. Program design varies depending on the resources of the available partners, the size and demands of the program, and the type of assistance offered. The following section describes how different types of employers structure EAH programs.

 

Private and Nonprofit Employers

Private and nonprofit employer programs often involve three-way partnerships between an employer or a group of employers, an administrative partner, and a technical assistance provider.

• The employer generally provides the funds, screens employees for eligibility, refers employees to the program administrator, markets the program to employees, and, in limited cases, may administer some of the benefits.

• A nonprofit or governmental administrative partner oversees the bulk of the program. For a demand-side program this means distributing the benefit, providing counseling and information on realtors and lenders, and assisting with obtaining a loan or other assistance. For a supply-side program, this means administering employer contributions and distributing funding to developers. The administrative partner may be a local nonprofit housing agency, community development corporation, community-based organization, or local government housing or community development agency.

• A nonprofit technical assistance provider often provides expertise in program design and start up, program tracking, and providing ongoing advice and assistance. They are usually only involved in demand-side programs.

 

Extending Benefits Into the Community   A number of universities, including Tulane, Yale, and the University of Southern California, as well as the University of Pennsylvania, provide housing assistance for faculty, staff, or both. However, university programs have sometimes been critiqued for increasing gentrification pressures and ignoring the needs of community residents. Recognizing these concerns, Howard University and the Fannie Mae Corporation designed the Howard University - LeDroit Park Neighborhood Initiative to include not only university faculty and staff, but also core city service workers and neighborhood residents. The program provides down-payment and closing-cost assistance, new home construction, and rehabilitation funding in the LeDroit Park neighborhood.

Public Employers

In many public employee programs only a governmental partner (usually a housing or community development agency) is involved, administering the entirety of the program, providing counseling, working with lenders, and distributing assistance. However, a government partner can still benefit from the expertise of a technical assistance provider, and may contract the administration of the program out to a nonprofit agency. Public employee programs may involve state or local government employees, or both, and may be administered by either state or local agencies.

 

It is important to note that while private employers can write off the EAH benefit as a cost of doing business, public employers often may have to make trade-offs in the provision of assistance. If local government chooses to invest in EAH, other programs may have less available funding.

 

Smaller Employers

Many smaller employers do not have the resources to independently fund a program with significant impact. Multiple employers can contribute to a funding pool to provide assistance either to employees of all participating employers, or to all area employees regardless of employer participation.

 

Multiple Jurisdictions.

Some programs include multiple municipalities or jurisdictions. The REACH program began with a network of designated local nonprofit housing agencies in the Chicago region that worked with individual employers to establish and administer their EAH programs. A single technical assistance provider, the Metropolitan Planning Council, tracked and funded EAH efforts across the six-county region. The REACH program is now statewide, with 13 agencies in the Chicago region and 15 outside of it. Combining multiple jurisdictions allows for combination of some administrative and technical assistance functions, sharing of resources and experience across jurisdictions, and regionwide effect on housing needs.

 

Eligibility and Restrictions

Income Limits. Income limits can help ensure that lower-income residents benefit from EAH programs. Many, though not all, employers restrict EAH benefits to low- and moderate-income workers—often defined as those earning under 120 percent of area median income. Supportive local or state policies such as matching funds may have lower income limits, such as 80 percent of AMI or less, which can provide an incentive for employers to reach out to lower-income employees. Targeting programs to low-income people also allows EAH to be combined with other low-income assistance and funding options, such as HOME and CDBG funds.

 

Geographic Restrictions. EAH programs can be restricted to designated geographic areas, such as near the participating company or in neighborhoods that are targeted for revitalization. Placing geographic boundaries on the availability of benefits in this way can ensure that program goals—such as reducing the commuting times of workers or stimulating the neighborhood housing market—are realized.

 

Purchase Price Limits. Purchase price restrictions can be used in combination with income limits to help guarantee that assistance is targeted to low- and moderate-income recipients. In this case, the housing market must be evaluated for availability of housing in various price ranges. Some federal, state, and local funding sources may also require purchase price restrictions.

 

Other Restrictions. Programs can be designed to include only employees of participating employers, all area employees, specific types of workers (such as fire, police, and emergency workers), or all residents in designated neighborhoods. The Howard University-LeDroit Park Housing Initiative in Washington D.C., for example, offers EAH benefits to all three possible types of recipients: university faculty and staff; city police, fire, and emergency workers; and residents of LeDroit Park.

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