Employers' Growing Need to Provide Workforce Accommodations

There was a time in our country’s growth when certain industries, particularly labor-intensive industries, would have to provide housing for the workforce in order to meet the demand of their business development. They were known as “company towns” because the housing — as well as all the businesses in “town” — were owned by the company. It was an idea that sometimes started with good intentions, but didn’t always work out so well. That was back when there were fewer options for people entering the workforce, and the land was not connected as it is today.

Today, employers are facing the same dilemma in industries that require significant worker populations in areas that lack affordable housing but require skilled labor. Particularly in the high-tech industry; and nowhere more so than Silicon Valley, but also with university and medical facility faculties and staff across the country. Companies are finding it difficult to recruit and retain a competitive workforce because of a lack of affordable housing options within the area. Extended commutes from neighboring communities contribute to traffic congestion and gridlock, and for the worker, it means extra time added to the workday, more cost in transit, and a very strong possibility that your day might start out tinged with a little road stress.

“Tech giants are the drivers of Silicon Valley’s robust economy. To continue being successful, these companies need to attract and retain the best employees,” says Paul Cardus, executive director for the Silicon Valley Association of REALTORS®. “Their employees need a place to go home to, so it’s in their best interest to provide housing assistance to their employees. Facebook and Google have started, and are planning for the long term, but more needs to be done. Cities and counties need to actively create housing opportunities at all income levels. Too often, office development far outpaces housing construction, leading to increased traffic congestion and declining affordability.”

Tech Firms Enter Housing

Numerous studies indicate that workers are more productive and have less absenteeism if they can walk, bike or take public transit to work as opposed to commuting by car. Millennials have embraced ride-sharing options such as Uber and Lyft for getting around. If you don’t need a vehicle to commute to work, you might not need a vehicle at all. No car payments, mechanical problems or parking hassles.

But is there land available for all this housing and the necessary development to make it desirable to a high-tech workforce? Not always. In fact, not usually. The original company towns were often in the resource extraction industries: metal and coal mining, lumber camps, and oil fields. Some followed the industry if it was in motion, such as the railroad camps and later with the itinerant fruit pickers and vegetable harvesters.

None of these industries were sited in municipalities, unless consigned to industrial or agricultural areas not fit for housing.

Today’s situation is quite different. While the original company towns offered employment, they often kept workers on the edge of poverty by controlling everything else: rent, groceries, even the currency, called scrip. You could easily “owe your soul to the company store,” as a popular song of the time expressed. That was supply-side economics. The more workers you had, the more minerals were mined, more trees cut, more rail laid, more wells drilled and more bountiful harvests were the results.

Skilled workers in today’s digital age have much greater choices of where they can work. Literally, anywhere in the world. Companies with campus-style headquarters in the United States are finding it difficult to recruit and retain a competitive workforce. It has become demandside economics with today’s skilled workers looking for a sweeter wine than served in “The Grapes of Wrath”, John Steinbeck’s account of the Oakies going to California during the Dust Bowl and Depression, looking for work in the orchards.

The new California migration is not to the fertile fields of the Central Valley, but to the Bay Area, where Silicon Valley is home to the tech giants, such as Google, Apple, Facebook and LinkedIn. They all face the difficulty of attracting and keeping the brightest minds of their industry because the availability and cost of housing is one of the tightest and most expensive in the country. These companies are under increasing pressure by employees and officials alike to construct housing to offset their rapid hiring. From 2010 to 2015, the region added 367,064 jobs but only 57,094 housing units, according to a 2017 report by the Silicon Valley Leadership Group and the Silicon Valley Community Foundation.

“Tech firms are feeling the housing squeeze and are having challenges attracting talent from outside the region. When talent turns down once-in-a-lifetime career opportunities because they don’t think they can afford a home here, you can’t turn your back on that. So more than ever tech firms are asking: how can we help?” said Kevin Zwick, CEO of Housing Trust Silicon Valley (HTSV).

The nonprofit organization is helping workers who qualify as first-time homebuyers through their Homebuyer Empowerment Loan Program (HELP), TECH Fund, and other programs which leverage private funds with public loan programs for deferred or forgivable loans, as well as assistance with down payments, closing costs and procedures.

“TECH Fund is solving both problems it was created to address,” says Zwick. “It not only gives Bay Area firms a proven impact-investing vehicle to create affordable homes, but it also gives developers the ability to compete in this hyper-competitive market and secure housing sites quickly.”

The Ly family spent over two decades renting in Silicon Valley, with dreams of finally owning a home. Thanks to a $45,000 loan from HTSV that dream is coming true. “We moved a total of seven times; not because we wanted to, but because we had to,” Ken Ly explains. “From apartment to apartment, from house to house, we’ve been renting for 23 years. Finally, we are moving because we want to, and to a place we can call our home.”

Yet it remains a problem of supply and demand with available housing stock.

Apple is feeling the pinch at its campus in Cupertino, where local government and local folk are leery of densification and the inherent social issues of too many people and not enough room.

According to appleinsider.com: “Cupertino’s government is frowning, however, at building any new housing (during a severe shortage of places to live in the region) because it gets more tax revenue from office space. Apple’s local taxes alone fund around 30 percent of the town’s budget. At the currently insane housing prices of Silicon Valley, a couple of Apple employees trying to buy a house in Cupertino would face a mortgage of around $10,000 per month. And there are only a couple dozen available houses for Apple’s thousands of employees to even attempt to buy anywhere near the company’s offices.”

Other tech-giants are having better luck. In 2017, Facebook revealed that it will build a village across from its campus in Menlo Park that will include 1,500 residences, a walkable retail district, a grocery store, and a hotel for its employees. LinkedIn has contributed $10 million to HTSV’s TECH fund to aid with housing for its employees in Sunnyvale.

Google is going big with its plans for employer-assisted housing (EAH) at many of its facilities throughout North America, because of lessons learned in Silicon Valley at Mountain View, where its 750,000-square-foot headquarters employs about 20,000 people, but fewer than 5,000 housing units were built between 2003 and 2014.

Google recently won city approval to construct a campus with nearly 10,000 housing units, offices, shops, businesses, and a public park in the North Bayshore area of Mountain View. Approximately 20 percent of the housing will be priced at below-market rate because of Google’s significant investment in Low-Income Housing Tax Credits (LIHTCs), a federal loan program established in 1986 which has helped finance over 2.4 million affordable housing units across the United States.

“I think that a lot of people enjoyed the suburban lifestyle that many of our communities have and they wanted to preserve that,” Pat Showalter, Mountain View’s mayor at the time told the San Francisco Chronicle. “They were fearful that densifying and providing more dense housing would really create problems for their communities. What’s important is that those communities are designed properly and we have the infrastructure that supports that dense design.”

“Company towns” of the 21st Century will have to be a much different animal than those of past times, driven by different needs. “The fact that companies that design software and build algorithms for a living are having to build housing is really an indicator of the failure of our traditional housing supply model,” Matt Regan, senior vice president of government relations for the Bay Area Council, told the San Francisco Chronicle. How the building industry responds, and what financial support it can hope for, will have a dramatic effect on EAH programs in industries requiring a skilled labor force that can be satisfied and feel invested in the community where they live and work.

Skilled Employee Housing

But while Silicon Valley might be one of the neediest areas for employee housing, it certainly isn’t the only one. Cities across the country are struggling to house skilled employees for other industries, such as university and medical facility faculty and staff.

The University Circle neighborhood of Cleveland is the cultural hub of the city, known as “Ohio’s most spectacular square mile.” It’s home to museums, restaurants, parks and other urban amenities. It’s also home to universities and medical research facilities that require skilled faculty and staff, such as Case Western Reserve University, the Cleveland Clinic Main Campus, a VA hospital and University Hospitals.

What the area lacks, however, is sufficient affordable housing for the faculty and staff. Fortunately, there is Greater Circle Living, which is a program that works with local businesses and qualified employees to provide up to $30,000 in forgivable loans and other assistance. It’s a public-private (P2) partnership whose motto is “An incentive to live near work.”

“It’s wonderful to live close to where you work. And it’s a self-supporting thing. The more people who live in an area, the more businesses that follow, and it becomes a thriving center,” explained Andrew, an employee from Case Western Reserve University.

Others have given similar testimonials. “I live 2.9 miles from work. I like to say I roll out of bed and into work. I’ve ridden my bike to work and I could walk to work. It’s convenient and it saves on gas, too.” said an employee from Cleveland Clinic.

With some professions, it’s not just a matter of convenience. Dr. Karthick has this perspective, “I love the proximity to work. I’m three minutes from Cleveland Clinic. I’m on call a lot so I need to be at work quickly. I didn’t want a long drive.”

Getting direct financial support from businesses that require a skilled labor force is not necessarily corporate philanthropy, it’s investing in their future. Using those funds to leverage available public funding and services is a multiplier that can have significant results.

The P2 model for EAH programs in cities experiencing difficulty recruiting and retaining a competitive workforce is showing results. Available land will always be an issue in a world that gets smaller every day, but the obvious benefits to businesses and neighborhoods of having workers who are invested in their community through having an affordable place to live can be part of the solution to that issue.

The Company Benefits

Aside from recruiting and retaining a more loyal and productive workforce, companies can benefit by developing a real estate portfolio to supplement their corporate assets. Plus replacing employees can cost 150 percent of the worker’s annual salary and impede team-building efforts. Attracting and maintaining the best and brightest of today’s skilled labor force gives a company not only a competitive advantage but builds brand recognition. Consumers will be more inclined to patronize companies that treat their workers well, and with the transparency of the Digital Age there is nowhere to hide bad business practices.

EAH programs are also a part of smart growth for revitalizing old neighborhoods and developing new ones with designing for density in mind. Having organizations that can combine public programs and services with private funding, and having supportive zoning and planning departments from local government are essential to developing the model for the future of housing’s evolving form.

Jackie, from the Cleveland Museum of Art, puts it plainly. “If you’re working in the area, why wouldn’t you want to live in the area?”