New worker perk: help buying a home
In Illinois, 70 employers offer assistance with everything from down payments to credit counseling.
By most measures, Edna Williams-Foreman shouldn't be a homeowner.
When she bought her condo four years ago, she was making $29,000 a year, was a single mother with three kids, and, just one year prior, had a low credit rating of 499.
But a University of Chicago program designed to encourage employees to settle in the developing neighborhoods around the school gave her a $7,500 forgivable loan toward her down payment and put her through a homeownership consulting program that helped her bring up her credit rating, taught her about the housing market and how to budget, and helped her avoid a tempting adjustable-rate mortgage that would have almost certainly ended up in foreclosure.
"My dream came true," says Ms. Williams-Foreman, bursting with pride as she shows off her three-bedroom condo that she's painted and decorated exactly as she wanted.
In the midst of dim news about the housing market, including a wave of foreclosures, sinking prices, and dwindling rates of home ownership, advocates tout employer-assisted housing (EAH) programs like the one that helped Williams-Foreman as a boon for both middle-class workers and employers.
A small but growing phenomenon, such programs usually combine counseling services with some sort of down-payment assistance – typically in the form of a loan that's forgiven if the employee stays with the company a certain amount of time. EAH efforts can often be the extra boost needed to help people buy their first home in an area near where they work. For employers, the programs help reduce turnover and encourage loyalty.
"It's a win-win for both companies and employees," says Michelle Olson, director of external and government affairs at the University of Chicago, who says the university began the program five years ago in an effort to better support middle-income employees and to help with the redevelopment of certain neighborhoods around Hyde Park, where it's located. Employees who purchase in some of those targeted neighborhoods – like Woodlawn, where Williams-Foreman bought her condo – have a higher household income limit and a higher purchase-price limit as an incentive.
Since the university began its program, it's had 600 employees go through the counseling program, 160 of whom eventually bought a home. Just one home went through foreclosure, says Ms. Olson, and that belonged to an employee who ignored the counselor's advice on a loan package.
What began as a rare phenomenon got a boost in Illinois when the state approved a law giving employers a tax credit of 50 cents for every dollar they invest in EAH. A handful of other states have since enacted similar laws, and federal legislation modeled on Illinois's law has been introduced.
"Sometimes people think they have a transportation problem and their commute is too long. Actually, that's a housing problem," says Lynn Ross, director of state and local initiatives for the National Housing Conference in Washington. She notes that one of EAH's benefits is helping people live near where they work.
Ms. Ross cites a recent study of one of the oldest EAH programs, at Aurora Health Care in Milwaukee. Researchers looked at the 208 employees who bought homes through the company's program in the past 15 years and found that they stayed with the company significantly longer and performed better than other employees. "It's the first time we've had a decent data set to be able to come back and say to an employer, 'This is having an effect,' " says Ross.
What started in Illinois with one company eight years ago has grown to include 70 employers, helping about 1,400 employees, says Robin Snyderman, housing director for the Metropolitan Planning Council, a Chicago research and advocacy group and a national leader on the issue.
Amid today's housing crisis, Ms. Snyderman sees a greater need for EAH efforts. "The challenges we face in the housing market right now remind us that the public sector can't fix this alone, and private sector dollars now more than ever are needed," says Snyderman. "With the tightening credit market, the down-payment assistance that employers provide goes even further to help people buy a home who wouldn't be able to otherwise."
While the down-payment help often gets most of the attention, Snyderman and others say the counseling component is equally important. In Williams-Foreman's case, she learned tough lessons from her counselor about the importance of credit and budgeting. She spent a year working to improve her credit rating from 499 to 700, ripping up her credit cards and calling creditors to make settlements, talk down interest rates, or correct information. She even sat her kids down to discuss the sacrifices they would make to work toward a home.
"I had them draw pictures of the kind of house they wanted," she recalls, proudly noting that her oldest son bought his first condo at 24.
When the condo she wanted came on the market and she was impatient for a loan, she was tempted by a mortgage broker she now refers to as a "shyster." Her counselor convinced her to get a more reputable loan instead, and she ended up buying her condo for $155,000.
These days, she knows all her neighbors, walks to her job as an alumni-service representative, and is heavily involved in her community, serving on boards of local school and community groups.
"I'm like this one-woman marching band," Williams-Foreman laughs, sitting in her brightly decorated living room. "I'm always telling people you don't have to make $100,000 in order to own something like you initially think."