The pros and cons of offering housing benefits

'The type of program depends on which employees they’re trying to recruit and retain,' says Canadian academic

The pros and cons of offering housing benefits

With the cost-of-living crisis continuing to persist across Canada, employees are seeking ways to reduce financial burdens.

One way to do that is through less expensive housing.

In fact, over one in four employees would switch jobs for employer-sponsored housing benefits and nearly one in three would prefer housing benefits over a pay raise, according to a JW Surety Bonds study.

However, just 13 per cent of respondents said they receive any form of employer housing assistance, while one in six employers said they plan to offer housing benefits in 2024 to facilitate the transition from remote to in-person work.

What was once a perk for top management is now becoming a competitive advantage for employers with employees who can’t afford the cost of living in many advanced economies, according to Alicia Eads, assistant professor at the University of Toronto’s Centre for Industrial Relations and Human Resources and the Department of Sociology.

“For employers that are operating in expensive housing markets and want their employees to be located in these markets, housing costs are becoming a disadvantage, not just in Canada or the U.S. but in other cities as well. People literally cannot afford these housing markets, even those with decent jobs.”

Housing benefits include downpayments, rental subsidies

The type of housing benefits employers can offer include downpayment assistance through grants or forgivable loans, rental subsidies, and buying or building housing units specifically for employees. However, which benefit an employer chooses to offer is largely dependent on their reasons for offering these programs, Eads said.

Housing benefits can help employers recruit and retain talent. However, programs like downpayment assistance may be more appealing to top-level management, while rent subsidies may be more appealing for early career individuals who are not yet ready to purchase a home, she said.

“Employers can have different goals for these types of programs, but even within those specific goals, the type of program depends on which employees they’re trying to recruit and retain,” she said.

Entice workers back to the office

Outside of recruitment and retention, employers may also be motivated to use housing benefits to improve the community where the employer is based, while others may want to use them as a way to entice employees to more willingly come back to the office.

“You can certainly imagine that offering housing benefits [that allow] employees to live closer to the office would help with willingness to return to the office. If someone doesn’t have to commute an hour to come into the office, that’s a much more enjoyable arrangement, not to mention better for the environment. So, I can imagine this working very well — but there isn’t any research on it yet to show if this is effective,” Eads said.

The pluses of housing benefits are also evident in JW Surety Bonds’ study of 710 employees and 310 employers, in which 77 per cent of individuals receiving housing benefits reported job satisfaction, while 60 per cent of non-recipients felt the same.

Similarly, there was a greater sense of mental well-being among recipients (75 per cent) than non-recipients (59 percent), and recipients were 25 per cent more likely to rate their overall work productivity as high.

Making housing benefits effective

Oftentimes, top-paid management level employees are more likely to receive housing benefits. So, for companies looking to make these benefits successful, they should be opened up to lower-level employees, who are “probably struggling more than those at the top,” Eads said.

Employers should also consider the tax implications that can come with offering housing benefits, she said.

“Certain housing benefits are essentially taxable income, so that gets added on to what the employee makes in a year and what they owe in taxes. And so that can sometimes be a bit of an unpleasant surprise for employees who are now essentially paying taxes on a higher income than they're actually getting.”

If an employer is providing housing that is rent free or less than market value, this would be a taxable benefit for the employee. Offering home purchase and home relocation loans are also taxable benefits, said Olivia Oszkiel, associate lawyer at Ascent Employment Law.

“Employers ought to consult their accountants and tax lawyers and make sure that if they provide housing benefits to their employees, that they comply with any Canada Revenue Agency obligations including correctly determining if the benefit is taxable, calculating the value of the benefit, calculating and withholding payroll deductions, and reporting the benefit on a slip.”

Legal considerations for employers

When offering housing benefits to employees, the best practice is to do so through a written agreement that explicitly states that the housing is a term of the employment and outlines what will happen if the employee is terminated. Employers should also ensure that housing benefits do not extend during a statutory, contractual or reasonable notice period, Oszkiel said.

“If these aspects aren’t clearly laid out, an employee could have legal grounds to argue that they are owed a payout for the monetary value of the housing during the applicable notice period if terminated. So, the employer could end up terminating the employee but still be on the hook for the employee’s housing,” she said.

Legislation differs by province, with each jurisdiction having their own Residential Tenancy Act. In British Columbia, section 48 of the act outlines that if housing is provided to the tenant for the term of the tenant’s employment, the employer can end the employee’s lease when their employment ends. However, the landlord must provide 30 days’ notice, she said.

Employers also should be aware of the risk that the employee will try to dispute the end of tenancy notice, as they may do so within 10 days of receiving the notice.

“This requirement is important to keep in mind when ending tenancy and making sure that it's done in the right way with the right form,” Oszkiel said. “If an employer is yanking an employee's housing benefit at the end of the employment, it doesn't look good, and they don't want to have that reputation, so making sure that everything is clearly set out is an essential consideration.”

Inequalities to housing benefits

Despite the positives, offering housing benefits could have a downside — by masking over the fact that the housing markets are not aligned with income rates, creating an incorrect illusion of affordability, Eads said.

As not all employers have the means to offer housing benefits, this can put pressure on the local housing market both and offering benefits like forgivable loans for downpayment assistance can mask how affordable the housing market is for many people while keeping housing costs high, she said.

“In a way, it's an artificial increase in demand for the local housing market. So, we can continue pretending that there are people who can afford these housing prices when, in reality, they’re being subsidized by an employer.”

This issue goes hand in hand with instances in which organizations buy housing and then offer them to employers at a below market rate, ultimately taking the housing supply out of the market for those who may want to buy in the area.

“In the short term, housing benefits really mask over the problems within the housing market, which is not a problem employers can fix,” Eads said.

“The fact that employers are feeling this pressure to deal with those based in expensive housing markets says a lot, but my hope is that instead of this being managed behind the scenes, employers start pushing back on policymakers to deal with the housing crisis instead of it being done on an ad hoc basis through employers who happen to be able to provide solutions for their employees, who are already privileged in other ways as it is,” she said.

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