Corporate Transferee Home AffordabilityCorporate Transferees Suffer Housing Sticker Shock
Employees who job hunt in many parts of the country get sticker shock really fast. There are several areas in the United States, mostly along the West and East Coasts in and around San Francisco, Los Angeles, Boston, New York and Washington, DC, that have higher housing costs than the majority of the rest of the U.S. Understandably, employees facing a job-related relocation can be hesitant to accept a move and face these higher costs. Differences in housing costs can crate a huge affordability gap that employers and home brokers are working to breech.
Corporate Relocation Programs
There are several program options corporations utilize to help employees transfer into higher cost-of-living areas. Examples include:
- Creative mortgage products: A wide variety of readily available mortgage options are geared specifically to dealing with high cost areas. For many relocation mortgage lenders interest only loans represent over 50% of their origination business. The interest only product is perfect for a transferee: lower payments, total deductibility, and geared around the relatively short term (less than 5 years) nature of most transfers.
- High-cost housing bonus or a Cost of Living Allowance (COLA): A predetermined bonus is based on the employee’s salary is paid annually once per year for a specified number of years or through monthly cost-of-living payments, while the employee is living in the high-cost area. Approximately 48% of organizations offer this program to high-cost area transferees.
- Mortgage subsidies: These programs were developed as alternatives to a bonus or lump-sum allowance and are also used to attract and retain key talent. Mortgage subsidies help transferees qualify for a higher loan amount by reducing their monthly housing payment, allowing them to qualify at a lower or “subsidized” interest rate.
- Salary increases: Some corporations are providing a one-time (or higher-than-normal) salary increase that is separate from performance reviews. This increase can be derived from many different methods and its intent is to help offset the sticker shock of moving into a higher-cost area. Recent surveys indicated that approximately 38% of corporations offer this type of assistance.
Brokers Educate and Handhold
Housing brokers, who are often the first to break the sticker-shock news to transferees, find themselves doing a lot of educating and explaining. They explain the other benefits of living in the area – promoting climate, culture or other attractive features. They may also talk about how markets appreciate, allowing them to upgrade their homes faster.
Visit RELODirect for more information on corporate transferee advice, relocation services, relocation tips, and relocation advice.
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