Beware of the Ultimate Golden Handcuffs: Cheaper Housing

As high mortgage rates make potential sellers wary of listing a home and buyers feverishly compete for disappearing inventory, some employers are stepping in to offer employees affordable housing solutions. An offer too good to refuse? It may not be as simple as that.

Housing help can come in many flavors. Companies can create planned communities such as Meta Platforms Inc.’s Willow Village in Menlo Park or Elon Musk’s proposed Snailbrook development outside Austin, with housing offered below market rates to attract and retain employees — a strategy not dissimilar to the “company towns” and “utopias” from a century ago. Local governments can provide affordable housing for employees and citizens, like Chicago’s Teacher’s Village, which is focused on city teachers and independently living seniors. Employers can also offer direct financial support, such as a down-payment assistance program, and help with closing costs, or guidance on how to access local grants.

Much as when employers started to offer student loan repayment assistance to lure in millennial hires, this trend of employer-subsidized housing will likely expand as affordability declines. The median cost of an existing single-family home has increased nearly $100,000 in two and a half years, according to a National Association of Realtors report. The mortgage rate has doubled in the same period and people’s monthly payments have gone from 14.7% of their income to 26%.

Should employees be tempted by a housing benefit? It depends entirely on whether your company is helping you buy your own place or providing you with accommodation.

Even though prevailing logic suggests we should not look a gift horse in the mouth, it is wise to be at least a little suspicious since many employee benefits function as golden handcuffs. Take for example an employer-matched retirement plan or stock options that come on a graded- or cliff-vesting schedule over years, as opposed to something the employee gets immediately. End-of-year bonuses are designed to retain talent until they can at least earn the full bonus. Company health insurance plans in the US could be seen as the most effective golden handcuffs.

It's already a nightmare that health insurance is tied to employment, lumping in housing would further reduce a worker’s flexibility to leave, which, of course, is the intent. For an employee, handing over this level of control may not be in their best long-term interests.