How to Use it

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

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:

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.

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?
• 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:

• 1Commitment and initiative of company leaders.
• 2Alignment of company mission with the strategy.
• 3Industry sector.
• 4Proportion of low-wage workers relative to the total workforce.
• 5Company location(s) relative to housing that workers can afford and to public transportation.
• 6Strength of employer connection to a given location and community.
• 7Existence 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.