A New Take On The Company Store
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On October 4, The Federal Home Loan Mortgage Corporation (Freddie Mac) announced
a program for its 5,000 employees to address their Workforce Housing problem.
The nation’s second largest mortgage lender formally unveiled a new initiative
to assist its home seeking employees to purchase near Freddie Mac workplaces,
principally located in the pricey Washington D. C. suburbs, near its corporate
headquarters in McLean, Virginia.
Workforce Housing problem? You didn’t know there was one did you? Well,
you did, but you probably did not think of it in those terms. You probably thought
of it as your lousy commute, the money you spend on that commute, or the rent
you pay to avoid such a commute. But remember “Workforce Housing.”
It is the new buzzword that, after the requisite period of being discussed and
analyzed by every think tank and housing oriented foundation, is about to leap
into the national consciousness.
And it might soon have a big impact on your own housing situation.
First, what is the Workforce Housing problem? Since the topic has been beaten
to death, let us just stipulate, as they say in the courtroom, that housing
prices are out of control, and that, fueled by a growing population and historically
low interest rates (which both giveth and taketh away), increasing numbers of
American families are hard pressed to find housing in or near most large population
centers.
Among the hardest hit have been working families forced by housing prices to
live far away from where the family breadwinner punches the clock. Too many
of these workers are first responders, those who the public should most want
within minutes of their police station, firehouse, or hospital. It is not sound
public policy to force them to live an hour away from their place of employment.
In fact, there are cities (Boston comes to mind) which have residency requirements
for all city employees. While enacted with the best intent, these rules have
created a hardship, causing hundreds of workers to quit jobs, abandon seniority,
maybe even pensions, because they simply could not afford to buy or rent decent
housing within the limits of that and other costly cities.
Then there are those “non-essential” employees who are still vital
to our way of life – teachers (who often have evening meetings, conferences
and extra-curricular responsibilities in addition to their day jobs) janitors,
utility, sanitation, and transit workers – the very people who make our
world run. A long commute for these workers, often among the lower paid of the
middle class, adds greatly to their economic burden, increasingly so with the
spiraling cost of fuel, and takes a big toll on their lives and that of their
families.
This is not new. In the 19th and early 20th Centuries the problem was not housing
costs, but transportation from outlying areas. The solution was the company
town. The mining and manufacturing companies who built these communities near
the factory or at the mine head were not as concerned with employee welfare
as they were keeping workers close at hand, eliminating excuses for tardiness
or absence. Of course, it was also a way to turn a corporate buck. Housing was
often substandard, the rents, paid to the corporation, were above market, and
employees usually had no choice but to buy family necessities from the company
store. The bottom line, however, was a workforce in debt to its employer to
the point of indentured servitude. I visited several of these towns in their
waning days and can tell you what happened to the residents when the company
either got tired of being a landlord or needed the land for a different purpose.
Exploited or not, the worker had a job, a roof over his head, and could roll
out of bed when the whistle blew, without walking or riding a horse for miles
to earn his meager wage. .
Now, after years of ignoring their workers’ housing problems, employers,
particularly municipalities, are realizing that Workforce Housing may be their
problem too, especially if the economy improves and valued employees begin searching
for work closer to home. This has encouraged a spate of conferences and studies
in large population centers; Fairfield County, Connecticut, San Francisco, urban
New Jersey, and Minneapolis-St. Paul have all made recent attempts to address
the issue.
But back to Freddie Mac. A preliminary announcement of the its new Home Benefit
Program was made on September 30 at a National Leadership Forum on Workforce
Housing sponsored by the U.S. Chamber of Commerce and the Harvard Joint Center
for Housing. Freddie Mac’s Chairman and CEO Richard F. Syron outlined
the program, tailored to assist employees in good-standing for one year or more,
to buy a first home. The highlights are a $12,000, interest free benefit which
can be used to cover the down payment, closing costs, loan origination or discount
point fees. The loan is forgivable at the rate of 20% for each year, up to five,
that the employee continues to work for Freddie Mac. The program also emphasizes
homebuyer and smart credit courses sponsored by the corporation.
In a more intriguing part of his speech, Mr. Syron, who spoke of his family’s
struggle to buy and hold the modest home they secured with a VA loan, went on
to talk about a “turnkey” product” that Freddie has developed.
Also named Workforce Home Benefit, this product, not even mentioned in the October
4 corporate press release, was called by Mr. Syron “a simple, convenient
kit that employers can tailor to their needs,” It is designed to help
employers:
- Provide a wide array of affordable mortgage options;
- Establish relationships with area lenders;
- Evaluate various forms of financial assistance;
- Set up homebuyer education programs;
- Find a third party administrator to set up and run the program;
- Determine that the program will not have unforeseen and unfortunate
tax consequences for either employer or employee.
This may signal a desire on the part of Freddie Mac to do more than facilitate
any coming Workforce Housing revolution. I read this as a clever way of market
testing this new product. Look at each of the bullets. All but the last would
provide a perfect niche for a powerful corporation such as Freddie to establish
a whole new profit center; not only “helping” employers with decisions
in each area, but establishing a true turn-key operation on a fee-for-service
basis.
Not that there is anything wrong with that. I am merely suggesting that at
least one of the two big secondary market players may be casting about for a
large role in the Workforce Housing market.
And that might just shorten your commute
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