Benefits of company housing

How Employers Support Employee Housing

According to a representative survey of 826 companies conducted by the German Economic Institute IW Cologne, 9 percent of German companies currently offer housing directly to their employees. This is done either through their own housing stock, subsidiaries, or external housing companies. Another 21 percent support their employees indirectly in their search for housing, for example through internal rental exchanges, covering brokerage fees, or providing organizational assistance.

There are significant regional differences: In southern Germany, a particularly high number of companies - 29 percent - are involved in supporting employees in their search for housing. In the north, however, the direct provision of housing is most widespread, at 15 percent.

A Benefit for Employers: Recruitment and Retention

The strongest argument for getting involved in the housing search is the impact on talent acquisition:

• Easier recruitment: According to an IW study, 58 percent of companies report that their housing offers make it noticeably easier to attract new skilled workers. This is particularly relevant for international talent, for whom a concrete housing offer significantly influences the decision to accept a new job.

• Higher employee retention: When it comes to long-term retention of skilled workers, 55 percent of companies report positive effects.

• Advantage for apprentices: Apprentices often compete with financially stronger groups on the open housing market, while, unlike students, there are hardly any government-subsidized dormitories available to them. A company-sponsored housing offer is a real competitive advantage here.

Tax Benefits for Companies and Employees

An employer can generally claim the full cost of company-owned or employee housing as a business expense. Whether this is done through regular depreciation (AfA) for owned properties or as a direct expense for rented properties depends on the model chosen.

Company-owned housing is also tax-advantageous for employees. If the rent charged is no more than one-third below the local market rate and that market rate does not exceed 25 euros per square meter, the housing is not subject to taxation as a taxable benefit. The employer does not even have to be the owner. The model also works if the company rents the apartment and sublets it to employees.

The situation is often different when it comes to occupancy rights, that is, when the company has merely acquired a right of first refusal for tenants from a third party. In such cases, the tax benefit may not apply. To account for all options and contingencies, it is advisable to consult a tax advisor.

Barriers: What’s Holding Companies Back

Despite the benefits, according to an IW study, only a minority of companies - 4 percent - currently plan to introduce new employee housing programs in the next five years. The following factors are seen as obstacles:

• 67 percent of companies cite unfavorable legal frameworks for leasing as the biggest obstacle.

• 44 percent lack suitable partners in the real estate industry.

• 38 percent are deterred by the high financial costs, and 37 percent by the organizational burden.

For small and medium-sized enterprises (SMEs) without their own real estate department in particular, the interplay of long-term lease commitments and short-term fluctuations in staffing needs presents a complex challenge. The IW Cologne sees potential here in collaborative models based on the division of labor: Several smaller employers could partner with a housing company to offer housing, thereby spreading the administrative burden across multiple parties.

Company Housing and the Housing Market

Can this concept contribute to easing the strain on housing markets beyond its immediate business benefits? The IW Cologne takes a nuanced view: After all, purchasing or renting existing apartments for employees does not create new housing supply.

The situation is different with new construction or repurposing: urgently needed new housing can be created on unused company-owned land or in vacant office buildings without directly competing with other investment projects. According to the study’s findings, the key to this is swift, digital approval processes as well as close, strategic cooperation between employers, local governments, and the housing industry.