EHAP Employers Homeownership Assistance Program
A PROFITABLE WAY TO RETAIN EXISTING EMPLOYEES AND RECRUIT NEW ONES
WHAT IS EHAP? EHAP stands for Employers Homeownership Assistance Program, a set of benefits that employers can offer their employees to help their workforce become homeowners. This can be a cost-effective way to improve employee recruitment, retention, productivity, and morale, thereby improving an employer’s bottom line. Originally conceived as a tool to recruit senior executives, many companies now offer housing assistance programs across their entire workforce. This trend is driven by factors affecting employees, like the persistent disparity between home cost and wages, long and costly commutes, and the desire to achieve an improved work-life balance. For employers, ongoing and anticipated challenges in hiring and retaining workers, and the desire to increase employee productivity and morale, make the EHAP program very attractive.
What are traditional ways employers help their employees?
How employers help their employees using EHAP
Traditionally employers have helped their employees by providing benefits such as:
EHAP can add to the constellation of benefits that:
• Flextime provisions • Telecommuting • Parental leave • Employer-supported childcare • Major medical insurance
• Help improve the bottom line for employers • Enhance the quality of life of the employees • Help revitalize communities across the country The employer-homeownership assistance programs is one of several emerging options that are gaining popularity in an increasing employee competitive marketplace.
Improving the Bottom Line for Employers Sixty-one percent of employees turn down relocation offers because of “cost of living/housing concerns,” according to a Prudential relocation survey on mobility trends. An employee benefits compensation package that includes EHAP can be an effective recruitment tool, especially in tight labor markets and where housing costs are high. Benefits of an Employers Homeownership Assistance Program can influence decisions being made by relocating workers, particularly those leaving more affordable communities and facing the challenges of living in a more expensive market.
Additional Benefits for Black and Hispanic Employees There is a 30 percent homeownership gap between Black employees and their white counterparts. Only four out of ten Black American families own the home that they live in. The homeownership gap between Hispanic and white families is 27 percent, with five out of every ten Hispanic families owning the home they live in. In contrast, seven out of every ten white families own the home that they live in. If your company offers EHAP to its employees, all can benefit regardless of race or ethnicity. The Employers Homeownership Assistance Program can go a long way in helping close this homeownership gap for Black and Hispanic employees.
White: 70% Hispanic: 50% Black: 40%
WHAT ARE THE BENEFITS? WHAT ARE THE BENEFITS TO EMPLOYERS? • When it comes to jobs and economic opportunity, where a person lives can be critical. Studies have shown that as workers are forced to live further from their workplace, their productivity declines, creating many challenges for business owners. • A study by Future Workplace and Kronos, found that 87% of employers said that improving retention is a critical priority for their organization. • Replacing an employee can cost as much as 150 percent of their annual salary in lost revenue from separation pay, replacement costs and reduced productivity.
WHAT ARE THE BENEFITS FOR EMPLOYEES?
• Employees who own their own homes are • Employer-assisted housing programs help build physically healthier than those who do not employee loyalty and increase productivity own their own homes. through improved morale, an enhanced employee work/life balance, and decreased absenteeism. • Homeownership stabilizes a family and its community, and they become more stable • By offering housing benefits, employers can employees. set themselves apart from their competitors, significantly improving their recruiting • Employees who own their own homes competitive position. obtain a higher level of education. • Employees who own their homes, lay down roots, • Employees who own their own homes are start and support families, and become part of more likely to participate in Civic activities a community, and they are less willing to uproot to help their communities. themselves and their families for a different job • There is a lower crime rate in communities and more willing to go the extra mile to help their where there is a higher homeownership rate. company grow and succeed. • There are fewer people on government public assistance in communities where there is a higher homeownership rate. • Homeownership provides “Safe Back Yards” for kids to play and to grow up in and to be sheltered from street violence. • Homeownership creates pride in oneself which leads to pride in homeownership, community, and employment.
Enhancing the Quality of Life for Employees
In many cities across the country, the cost of purchasing a home continues to exceed what most working families can afford. Even areas where home prices have softened, they remain unaffordable to working families. In addition, rental rates continue to rise. This situation is prevalent in most metropolitan areas and in emerging growth centers. The home affordability gap is the persistent divide between high home cost and lagging incomes, also exacerbated when mortgage underwriting standards tighten, and interest rates begin to increase.
What are the Most Common EHAP Benefits? Forgivable Loans: Traditionally, the employer provides a small loan to the employee to assist with their down payment and closing costs. These loans typically range from approximately $5,000 to $10,000. To meet the goals of the employers, they may want to include eligibility requirements when they offer a loan. These could include specifying where the employee can purchase a home, such as: • Within 10 miles of the employee’s workplace. • The length of time the employee needs to stay with the company for the loan to be forgiven; or • The income level of the employee, which targets those most in need. Loans are typically secured with a lien on the property to prevent the employee from selling the property and moving without repaying the loan. Employer-provided loans are typically structured as a deferred or forgivable Loan. With a deferred loan, the payment on the loan is deferred until some point in the future (usually five years), or until some event occurs (the property is sold, the employee changes jobs, etc). Forgivable loans are similar to deferred loans, except no payment is required in the future, provided certain requirements are met, such as: • The employee remains with the employer for a set period of time. • The employer will “forgive” 20 percent of the loan balance each year for five years provided the employee remains with the employer and continues to live in the house.
Grants: An employer-provided grant is like a forgivable loan. The employer provides a grant to the employee to assist with down payment and closing costs. Typically, grants do not have to be repaid unless the employee leaves the company before a set period (such as five years) has passed. An employer might prefer a grant to a loan simply because a grant may be easier to administer. As with grants, however, employers may want to include eligibility requirements when they offer a grant to meet some of their business goals. These could include specifying: • Where the employee can purchase a home, • Such as within 10 miles of the workplace. • The length of time the employee needs to stay with the company; and • The income level of the employee, which targets those most in need. There are Tax Implications for Employees: An EHAP financial assistance benefit from an employer to an employee can have tax implications for the employee. Employees should consult with their tax advisers for counsel on their specific situations. The IRS considers forgivable loans and grants as compensation. As such: • They are taxed as income to the employee. • They are deductible as a business expense to the employer. • A grant would be taxable to the employee in the year in which it was provided. • A grant would be deductible as an expense to the employer in the same year. • Forgivable loans would be taxable when they are forgiven. For instance, if an employer provides a $10,000 forgivable loan and forgives $2,000 of this loan each year, the $2,000 forgiven would be considered taxable compensation to the employee in that year. However, we always recommend consulting with a Tax Professional for Tax Professional Advice.
HOMEBUYER AND HOMEOWNER EDUCATION
Buying a home can be a confusing process. A home buyer must wade through mounds of paperwork at the closing, followed by the daunting responsibilities that comes with being a homeowner. The more information homebuyers and homeowners have, the more prepared they will be for these responsibilities. Homebuyer education and homeownership education are two valuable EHAP benefits. Homebuyer education can help prepare potential homebuyers for homeownership, while homeownership education can help current homeowners protect their investment. According to National Association of Realtors Profile of Homebuyers and Sellers, 80 percent of first-time homebuyers and 66 percent of all home buyers say they benefited from understand the homebuying process. Homebuyer and homeownership education is not only a value to the employees but also an easy and inexpensive EHAP benefit to implement for their employees.
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Let Us Help You If you would like to consider providing an Employer Homeownership Assistant program (EHAP) for your employees, we would welcome the opportunity to meet with you and assist you in setting it up. We will work with you in setting up your program and help you with deciding what level of financial participation your company will provide to your employees. We will work with you in locating an EHAP administration and manager. You are not expected to administer or manage the EHAP benefit plan, especially if the benefit provides financial assistance to your employees. For more information on the EHAP program, and what you need to do to consider an EHAP program for your employees, reach out to me today. I’d be happy to help.
Ben Slayton President & CEO LEGACY Home Loan (844) 466-3669 (Office) (702) 425-3374 (Direct) BSlayton@MyHomeLegacy.com www.MyHomeLegacy.com