Improved Housing Market Calls for More Flexibility in Relocation Programs

Roy Maurer By Roy Maurer June 16, 2017
Improved Housing Market Calls for More Flexibility in Relocation Programs

Cindy Madden, director of consulting services at Cartus.

Employers should look to adjust their relocation programs and policies to reflect the U.S. real estate market's continued recovery.

Cindy Madden, director of consulting services at Cartus, a global relocation provider in Danbury, Conn., discussed housing market trends and their impact on relocation programs with SHRM Online.

[SHRM members-only toolkit: Managing Employee Relocation]

SHRM Online: How are U.S. housing market trends impacting domestic relocation programs?  

Madden: As housing markets continue to recover, home sale programs are impacted by median home prices being up and very low inventory in many areas. While mortgage rates are still low by historic standards, rising mortgage rates may impact affordability and lower home sales.

These trends are impacting domestic relocation programs in several ways, such as company policies on loss-on-sale, COLA [cost of living allowance] and mortgage support. For instance, only 11 percent of companies offer loss-on-sale to all employees, although another 24 percent offer loss-on-sale based on employee level. Simultaneously, however, 53 percent of companies report a moderate or high degree of challenge relocating employees to high-cost areas.

Most companies have already moved to a buyer value option program from a guaranteed buyout program for their general population. But a new trend is also emerging—a move toward temporary and short-term assignments, indicating that traditional home sale programs may be under less pressure from market trends in the future. Companies have used assignments in the U.S. for years for project work, but now they are increasing the use of assignments to accomplish ongoing business that in the past may have been conducted by a transferred employee.

SHRM Online: What are the challenges to first-time home buyers, and how can HR and relocation managers help mitigate those difficulties for transferees? 

Madden: The percentage of first-time buyers is 33 percent, while historically it typically represents 40 percent of the home-buying market. There are a number of reasons for this:

  • 70 percent more students are getting loans, with the typical student taking on twice as much debt, and the amount of loans has tripled in size during the last decade to $1.3 trillion.
  • Inventory is low in general. This is driving up prices and first-time buyers are finding it difficult to break into the market. Also, the number of available homes for the average first-time home-buyer saw its steepest year-over-year drop in three years in 2016 to 12 percent.
  • Strict credit standards are making it difficult for first-time home buyers to purchase a home.

Given the low inventory, some transferees may need additional house-hunting trips. Employers should consider offering to reimburse new-home closing costs to the renter population, which may get renters into the home-buying market. Employers could also offer COLA to compensate for high living or housing costs if there is noise from the employees being moved to high-cost locations.

SHRM Online: What are some ways employers can alleviate concerns about rising rental rates and a shortage of corporate rental inventory?

Madden: In high-cost areas, we see some clients offering rental subsidies, usually for up to three years. After that time, though, if the employee's salary has not increased substantially, the employer may need to consider other options.

For companies moving people continuously into one location, like near their headquarters, the company might want to consider renting a block of apartments for a year or more, as they might receive a volume discount on the rental rate. Working with a corporate housing provider to rent a block of apartments and rotate employees in and out can help control costs and provide a consistent short-term housing solution for employees. This option will work if there is enough volume and predictability, otherwise the company may sit with a vacant apartment or two. Employers may want to consider allowing more temporary housing time for renters to find a suitable rental. Most policies offer 30 days, but this may need to be increased to 45 days. Another recommendation might be to provide [renters with] a local area tour to become familiar with pricing and availability and to ensure employees are ready to make decisions quickly because they have become more familiar with the destination location.

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