How should employers respond to the housing crisis?

The housing crisis in Canada continues to be a source of stress for many workers, straining their finances and influencing career decisions.

For many Canadians, their hard work isn’t paying off like it did for previous generations.

“Your paycheque doesn’t go as far as costs go up, and saving enough seems harder and harder,” said an announcement from Ottawa earlier this year.

“Young Canadians are renting more than ever and being priced out of their communities. Families are finding it difficult to get a good place to settle down.”

While the federal government has unveiled an ambitious housing plan, the results could take years.

For companies struggling to attract talent in high-cost areas such as Toronto or Vancouver, remote work and alternative compensation structures may be the only answer.

“This is going to be the new normal, and companies have got to find a way to deal with it effectively,” says Rick Brick, associate executive professor of management and strategy at the University of Alberta.

Assessing regional cost-of-living disparities can also drive employee satisfaction when balanced with effective housing support, he says, adding that the time is now for employers to adjust their strategies, as housing pressures are likely to continue.

“If the firm finds they really can't attract enough people — they need 50 new widget makers, and they can only get 20 of them based on the salary… when they start to check as to why, it becomes evident that they're not paying enough in that market for people who have rent or a mortgage payment to be able to take that job and afford to live on that income. Then, at that point, they would have to find a solution.”

Internal, external equity in location-based pay

As housing prices soar, employers may need to adjust wages based on an employee's location to account for high living costs, Brick says; however, this approach brings new complexities to pay equity.

“Employees typically look at two aspects when they’re looking at equity for compensation. One is internal within the company, the other one is external,” he says.

High wages required to attract employees to cities like Toronto or Vancouver could disrupt external equity.

“If, let’s say in Toronto, in order to attract people, all of a sudden they’ve got to pay a much higher wage than you would see them paying for a similar employee in Timmins, Ont…. that would change that external equity picture significantly,” he adds.

Temporary supplements for housing compensation

HR leaders should carefully consider how to structure wage adjustments, perhaps as temporary supplements rather than permanent raises, Brick says. The key is keeping the adjustment flexible so that the top-up can be adjusted or removed as market conditions change, rather than becoming a fixed part of the base salary.

“They would have to treat it as a temporary bonus structure, temporary payment, only for the cost of living, because the cost of living, presumably, could change a year from now, two years from now,” he says.

The temporary supplement approach allows employers to provide essential financial support without creating long-term equity concerns or permanent salary increases, which might become unnecessary if housing costs stabilize.

Brick further recommends employers structure these supplements as conditional, so they can be easily retracted when conditions change.

Rethinking compensation for high-cost living areas

Although policies that tailor compensation based on employees’ geographic locations can be controversial, Moshe Lander, senior economics lecturer at Concordia University, notes that similar structures already exist within government.

“If you live up in the Territories, for example, you get some pretty big tax breaks… to induce people to go take jobs up there that probably people otherwise wouldn’t want to do,” he says.

By adopting a similar approach, employers might attract talent to high-cost regions like Toronto and Vancouver, offering location-based pay to offset higher living expenses.

However, location-based compensation should also be carefully managed to avoid perceptions of inequity among employees, Lander points out: “It’s whether you can attract the people that you want.”

Brick echoes this sentiment, adding that companies may need to adjust wages significantly to secure talent in competitive markets.

“If the firm finds they really can’t attract enough people… they would have to find a solution,” he notes, which could include wage adjustments, remote work options, or even relocating operations to more affordable locations.

But pulling talent away from urban cities will always be a challenge, regardless of housing costs, he says.

“The problem is a lot of people want to live in Toronto. There's a lot of people who want to live in Victoria, Vancouver, understandably, and so at some point, the employer may have no choice but to look at raising wages, or they're not going to be able to attract the talent they need to operate in those areas.”

Remote work and pay structures

As more employees choose to work remotely, companies face the challenge of balancing in-office and remote roles with fair compensation, says Brick.

“I think as we came out of COVID, a lot of employers, including federal government, thought, ‘Well, we'll just go back to the way it was before.’ And if anything, what the research is showing is that you're not going back to the way it was before, you may get to a new normal that may not be exactly what it was as we came out of COVID, but the new normal is going to see more and more employees working remotely.”

Remote work on its own could constitute a separate pay structure, Lander points out, as the costs associated with working remotely are very different from those of working in the office.

“I think that companies are also very slow then to realize, if you want the ability to work from home, your financial compensation needs are different as well,” says Lander.

“Part of your compensation, presumably, is to pay for you to drive, park, have to worry about getting a coffee at the local Starbucks. If you work from home, maybe I'm okay with it if you're willing to give up 10 per cent of your income because you don't need to pay for those things anymore.”

Housing shifts lead to employment shifts

Lander also highlights that as companies rethink office use, some of the excess office space in urban centers could be creatively repurposed to ease the housing shortage. Retrofits, he suggests, could turn some floors of office buildings into residential units, helping to alleviate pressure in high-cost urban markets.

With remote work reducing the necessity of central urban office bases, some companies have moved to less densely populated areas. But while this shift might help alleviate housing pressure in urban cores, Lander cautioned against overlooking infrastructure needs in growing areas – using Calgary as an example, which he says in about 15 years will have a population of three million.

This sentiment is echoed in the employment sphere, Lander explains, as he urges employers to understand the individual circumstances of employees and recognize the choices that make certain living arrangements preferable.

“If you have a company that pays its workers based on some HR schedule of a grid, that ‘This is years of experience, and this is your degree’ – you need almost a third dimension that says, ‘And where are you living?’ Because where you're living is going to matter.”