The Affordable Housing Crisis: An Existential Threat for Gaming and Hospitality

by Chris Province

There are more conversations taking place about employee compensation than ever before. Seemingly every casino property has increased pay over the last year. The question remains, though, are the recruitment and retention challenges for line level employees any closer to being solved as a result of these increases? Could there be deeper, systemic challenges creating chronic understaffing for gaming and hospitality operators? After deeper analysis, it appears the most pressing employment issue for many tribal operators is the lack of affordable housing for the people working in lower wage positions. Lower wage positions comprise a majority of frontline casino and resort staff and the people who fill these roles are the heart-and-soul of the operation. They are also the most likely to be struggling now as post-pandemic increases in housing and food costs create a persistent threat to their well-being.

How has the affordable housing challenge migrated? Historically, housing shortages have been a challenge to employment in coastal cities. Now, the challenge of affordable housing has spread across the country and exists today as a national problem – affecting urban, suburban, and rural areas in nearly every state. People are moving from high-cost urban areas and bringing the affordable housing crisis with them. Areas with lower housing costs are experiencing rapid population growth and resulting mortgage and rent increases in historically affordable markets can range from 25-55 percent.

What’s driving the affordable housing crisis? The affordable housing crisis is driven by economic factors of supply and demand. During the pandemic, consumers found themselves with a glut of savings while interest rates made investment in housing attractive, driving up demand. At the same time, the U.S. experienced a nationwide labor shortage and supply chain challenges reduced the availability of building materials, driving down supply. These factors combine to create a perfect storm for elevated housing costs. Nationwide home and rent prices increased nearly 20 percent in 2021 – the highest increase since 1979. According to a housing advocate group Up for Growth, the U.S. is currently short 3.79 million homes and there are 169 metro areas failing to keep up with housing. Families with low-to-moderate incomes are increasingly having a hard time finding housing they can afford, with 70 percent of low-to-moderate income earners finding themselves financially strained by housing costs. The shortage of affordable and available homes disproportionately affects minority households. Without assistance for low and moderate-income employees in high-cost areas, employees find it difficult to secure housing and chronic understaffing persists. Chronic understaffing exacts an incredible toll across the entire workforce, creating challenges to morale and increasing occurrences of burnout as employees carry the extra day-to-day load, with no relief in sight.

What are Employer-Assisted Housing (EAH) Solutions? EAH is any housing program – rental or homeownership – that an employer helps finance or assists in developing in some way. These programs provide a channel for employers to help employees with the cost of owning or renting a home, typically in neighborhoods near the workplace.

What are the competitive advantages of EAH programs? EAH programs enable recruitment, increase loyalty, and improve retention. Commuting times are greatly reduced and employees report higher morale because of their economic security and work/life balance. Research shows that employees who own homes are more productive, work harder, and are more willing to go the extra mile to help their company grow and succeed. Effective EAH programs also generate tremendous amounts of social good will.

What are the most common EAH benefits? EAH programs can be delivered from the perspective of supply or demand. Demand-side EAH benefits can include down payment or closing cost assistance that can be forgiven over time, rent subsides, secondary financing, homebuyer education, or moving cost assistance. Supply-side EAH benefits, while less common, include cash contributions to developers, land donations, construction financing, and low-income housing tax credit investment. Demand-side solutions are typically preferred by employers because of their lower costs when compared to supply-side options. While the demand-side EAH solutions have lower administrative requirements, the challenge of these solutions is that for them to be effective, adequate housing must exist in the first place. For communities without available housing, supply-side solutions are the path to increasing the affordable housing stock for low and moderate-income households.

What are some primary considerations for EAH programs? EAH is unfamiliar to most companies, meaning greater competitive advantage is available for organizations with effective solutions. When considering which EAH benefits may best fit your organization, some things to keep in mind are:

• Employers are permitted to donate excess land to developers in exchange for priority consideration for their employees and right of first refusal when the property is sold.

• Employers with capital or access to lower interest rates are permitted to provide construction financing.

• Communities can leverage government funds through matching programs where every dollar of housing assistance provided by a company is matched by state or local government up to a specified limit. While matching funds don’t directly benefit the employer financially, they can provide a competitive advantage in recruiting when appropriately leveraged.

• In some high-cost areas, rental assistance may be more effective than homeownership assistance for low-income employees, so it’s important to assess the needs of the workforce and your specific market conditions relative to rent and ownership expenses.

• IRS regulations prohibit housing from being restricted to occupancy only by company employees, but businesses are allowed to negotiate specific terms for employees.

What are some of the unique challenges in the management of multi-family employee housing facilities? The prevalence of adverse social behaviors within employee populations will vary based on the demographics being served. How to effectively manage a “zero tolerance” policy towards domestic violence, illicit drug activity and other behaviors harmful to employee communities is imperative. It is highly recommended that employee property leases include language that legally allows evictions on these matters. Registered tenant enforcement is also paramount to avoid the housing benefit being used to benefit another party. The cost of turning over units can also be substantial and damage to property is not uncommon. As a result, payroll deduction permissions for these instances are also recommended.

What opportunities are created by this challenge? This crisis calls for courageous leaders. A lack of affordable housing places stress on existing operations and constrains expansion opportunities. Many tribes with the financial resources to expand their enterprise are asking, “How do we employ staff for an expansion when we can’t staff our current operations?” This is a legitimate question, and one that will require meaningful conversations and courageous action to answer.

A lack of affordable housing makes it extremely difficult to attract employees. By offering housing benefits, employers differentiate themselves and increase competitive advantage for talent. EAH programs are not designed to be a one-size-fits-all solution and rely on senior leaders from impacted organizations to assess their specific needs and available resources to increase their competitiveness and ability to serve their employee communities.

Chris Province is President of Player Performance Group. He can be reached by calling (539) 777-4120 or email [email protected].