I once represented a community of “affordable housing” sponsored by an employer. For what it’s worth, I’d like to tell you how it functioned.
Once upon a time there was a University that was situated in the midst of a community of Million Dollar Plus homes. At some point in the history of the University, they began having great difficulty getting Professors to come to teach at the University, because the Professors could not afford to live anywhere nearby. What to do, what to do!?!
The University purchased a parcel of land and hired a developer to build a housing development of large, 2,500 sf homes. These homes were attached at one party wall. Two homes then a break two homes then a break, a whole community of what I call “twins” and most people call “duplexes”. Large two story homes without basements that attached at the two car garage and were “mirror images” of one another.
The University maintained ownership of the land. Unlike a “condo complex” where the owners of the houses jointly own the land, the land continued to be owned by the University to reduce the cost of housing for the professors.
The increase in value of the homes was controlled by a governing document and the increase in cost of the homes could only go up by the same % that the University used to increase salaries of the Professors. The cost of the homes, which were purchased and not rented, was maintained at an “affordable” level and only Professors could buy them. The gain at time of sale was controlled, but also went to the homeowner and not to the University.
The University received the original purchase price of the homes to offset cost of construction and sold them “at cost” not including the land value, since the buyers bought the houses and not the land. There were a few problems in the ongoing complex of Professors…but not many.
This is but one example that I have personally had first hand experience with, so I assume there are others. When a single employer has thousands of employees, providing a means of good, affordable housing, could help keep salary costs down while giving their employees a place to live close to where they work. Better productivity, less commute time, people tend to work longer hours because it is convenient to stop into the office and catch up on some work.
What do you think? Too Utopian for a quiet Friday morning?
I think it works if the labor force is highly skilled and it’s difficult to attract good talent. For companies whose labor force isn’t so specialized I’m not sure it makes as much sense. I could see a Microsoft doing it. Boeing, I’m not so sure.
So what is the agent’s role in this community? Since the cost is controlled and I imagine all the houses are similar, I don’t know how much you would add to the process. I am picturing the whole thing being handled through the university housing office, similar to what they do with dormitories (except with purchases rather than rentals).
I think the market is already trying to create affordable housing by all of these price reductions, but the govt is trying to prop up prices of homes as evidenced by the bailout package.
I would say it’s too utopian and would require additional resources for companies to administer a plan like that thus increasing costs of doing business.
I imagine it would be up to the individual employer whether they wanted any agents involved at all. Most likely, the company would not in fact want to hire an employee to do the job of representing the homeowners when it came to purchase and sale of these homes. What if there were no sales in a given year? Then you would be paying for someone who had that expertise to do nothing all year. And, even though the 6% arrangement is the one we are all familiar with, it’s not like it’s the only one out there.
It is possible, by the way, that an agent can be concerned about this topic and not actually be looking to derive any financial gain. I suspect that Ardell isn’t looking to make money off these ideas.
I do agree that if the professors could only sell to other professors, and if prices are determined by the university’s policy, then an agent might not have much of a role in a sale, other than contract administration. Doesn’t mean it’s not still a good idea.
Cautious Buyer asks? “So what is the agent’s role in this community?”
Sorry to confuse you, there’s nothing in it for me.
I was not involved in the purchase and sale of these homes. At present I am trying to assist some Powers That Be in acquiring land for “an idea”. My premise is “their idea” is incorrect, and so I am exploring “ideas”. You can’t go get something if you don’t first know what you are going to do with that something. So I can’t…or won’t help them “go get it” if I can’t buy into the “they shoud have it” and I suspect that is partly the reason why they haven’t been able to “get” enough of “it” to date.
Back to the University and my role. The “homeowners” started thinking this way. OK, I’m going to get 5% to 8% appreciation no matter what while the homes in the area are appreciating at a higher rate. If I’m going to get the same appreciation whether I run the place into the ground or maintain it well, I may as well run it into the ground.
Also the HOA dues were supposed to maintain the pool and common areas, but the owners spent the money on parties and other things, thinking the University will have to shell out the money to fix the pool eventually out of safety concerns. They started viewing everythng as “a company benefit” and using in a way that forced the employer to pour in more “benefit”.
It’s a shame really…could have been a great concept if the owners were a bit more responsible and utopian in their efforts. It’s still there and I’m sure it’s just fine without me, but the concept that people would intentionally ruin real estate was just not my cup of tea.
As to “The University” there were a few pitfalls as in people who have limited and guaranteed capture of appreciation, sometimes fall short and “utopian principles” did not prevail. A good thing can turn bad because human nature is sometimes not a good thing.
It’s quite common in Japan for employees to take housing from their employers. This home is not owned but is rented from the employer at a seriously subsidized amount (average about 33% of market value). Where I was renting privately a small studio for about $800/month one of my Japanese friends not too far away (two stations) had a two bedroom place for $400/month. There are also often dormitories for employees to rent (like college dorms) with shared facilities which are ridiculously cheap (think about $100 or even free). While handy they sure do not lend well to a social life separate from the firm. And this is not a new idea. It’s been done since forever.
I think it’s a great idea and can see large, stable, operations getting involved in this. Your University’s idea is quite the hybrid approach (co-op and leasehold, yet still somewhat private) and will be a success as long as it remains pure in its mission (unlike the UBC leasehold endowment trust lands which have become luxury pads beyond the pay scale of most professors).
One way employers could help is through down payments. Usually the biggest obstacle in buying a home is the down payment. Also, the gift of the down payment from the employer also acts as a retention tool in that you would need to pay it back if they left the company voluntarily. This would ultimately lower recruiting cost of employees since the turnover would be lower.
In fact, it doesn’t even have to be a gift. It could be a second mortgage. We have a University here in Chicago that offers 2nd mortgages to their employees which is a big deal now because banks have all but abandoned the second mortgage market.
Ironically, owning a home is usually people’s largest financial expense yet most employers do nothing to help lessen that burden which could be a huge benefit to employees and definitely increase employee/company loyalty.
Another idea is subsidizing the cost of ownership. In some way acting as a non-occupant co-borrower so the mortgage is affordable by most standards in high cost of living areas.
Heck, some companies might even consider just giving certain employees a low interest loan and just cutting out banks altogether.
I am sure there are plenty of innovative ways to encourage homeownership and lessen the burdern on their employees.
I like Russ’ idea of down payment assistance. That would be very easy to implement. Another option would be for employers to recognize that it costs more to live in one place vs. another and to handle employees’ housing needs accordingly. The military and government recognize this and provide larger housing stipends when you are stationed someplace that is more expensive. Civilian employers don’t always seem to recognize this. One of the things that has always struck me as odd is that if you are, for instance, an aerospace engineer working at a certain level, your pay scale is roughly the same regardless of whether you are working in Seattle, St. Louis, or Birmingham Alabama. Yet, cost of living is quite different. $70k a year is a different animal here vs. in St. Louis. It’s actually gotten to the point that I think this is a threat to our local economy – I’ve had clients come here for what they thought were good paying jobs, and then find out what it was going to cost them to live, and decide that they weren’t going to move here after all. Doesn’t happen often but if the lifestyle they can afford someplace else is enough better, it can make it tough to convince them to relocate here. It also reduces competitiveness of local businesses. This is not unrelated, for instance, to some of the factors underlying the IAM strike at Boeing…and rumor has it SPEEA is also talking strike.
I’ve heard Stanford subsidizes their profs. I would love to hear the details of how that works, if anyone knows.
biliruben,
For the record, “The University” in this post is not Stanford. Biliruben, whether it be a builder or a complex or a University, once the entity is stated, the discussion can’t continue. Lawsuits are filed when you start naming names and transparency is crushed in the process.
I once wrote a post about general builder practices, which is quite useful to the buying public. Then in the comments someone said “X builder does that!” Once you name an institution or a company…it hinders the process of free flow of information.
I say this for the benefit of all readers and people who comment. It’s why I sue generics like “Powers That Be” and “University”.
The World craves transparency, but there are things that will prevent it from growing:
1) Naming Names
2) McCain using the word in Presidential Debates 🙂
Employers spend scads of money helping new hires buy houses and transferred employees sell houses. Always have and always will.
Companies give a ton of money away to “worthy causes”.
What Employers don’t do enough of is help the existing employees with housing issues, which is a VERY worthy cause.
Kind of like the man that sends flowers to his girlfriend at work every Monday, to brighten her work week…until he marries her. Then its, “What’s for dinner!?”
Cool idea – although I would think large tech companies in Silicon Valley would be all over this idea before Microsoft jumped on it.
As long as the prices of Silicon Valley homes for Apple, Yahoo, Google, eBay, etc employees cost a lot more than they do in Seattle/Redmond for Microsoft, Amazon, etc employees, I don’t think MS would have a strong incentive to implement something like this. Although, I think it would be great idea, especially since the era of golden handcuffs has turned to bronze.
According to Zillow, an average home in Mountain View, CA costs $300K more than one in Redmond, WA does and according to Glass Door (Barton’s other startup), your average Software Engineer at MS only makes about $5K less/year than their Valley compatriots.
Well what you were describing didn’t sound like Stanford, Ardell.
I just wanted to know whether anyone had any knowledge about Stanford; it’s successes and failures and how it worked in practice. I’ve heard the waiting list is now so long that their system is essentially broken, but that’s just what I’ve heard.