Jobs far outnumber people in the Tennessee tourist destination of Pigeon Forge, home to the Dollywood theme park and resort. Employers tap surrounding towns for workers but still struggle to fill roles. The challenge is made all the harder by a severe shortage of affordable housing needed to draw potential employees to the area.

Finally, Dollywood decided to do what more and more employers across the country are doing: It went into the housing business.

Employers large and small are finding that providing affordable employee housing is a highly effective recruitment tool as the extreme shortage of housing has caused rents and home prices to balloon across the nation. It’s been especially helpful for drawing workers to hard-to-staff sectors such as health care, manufacturing, and hospitality and leisure.

It can be very difficult for lower-paid workers to find homes within their budgets in expensive resort towns where they’re competing with vacationers for the few units available.

The approaches of employers vary widely, from constructing tiny-home communities to leasing entire blocks of apartments. But the goal is the same: attract and hold on to workers by providing them with a reasonably priced place to live.

Providing workers with affordable housing is even more important now as the scarcity of housing has led to rental prices rising about 25% since the start of the COVID-19 pandemic, according to Realtor.com® data. On the for-sale side, median home list prices shot up 38% from May 2019 through May 2023.

Dollywood partnered with Holtz Builders, in Wisconsin, to construct a dormitory-style residence hall large enough to accommodate 750 workers on land adjacent to the park. A Holtz subsidiary manages the property and charges workers modest weekly rents of $135, including utilities.

That’s a significantly lower rent than market rates in Pigeon Forge, where Dollywood is located. There were about 50 units for rent with a median price of $1,900 a month (or about $475 a week) as of May 30 on Realtor.com. The median home list price was $690,000 in May.

The investment is paying off. After the residence hall opened, Dollywood was able to recruit twice as many college interns and foreign exchange workers to work the busy summer season. Now, more beds are coming.

“We already have Phase 2 under construction, which will take us to 1,000 residents,” says Tim Berry, Dollywood’s vice president of human resources. “And we are trying to figure out what Phase 3 will look like.”

More companies are using housing to attract workers

The trend might conjure up images of 19th-century “company towns,” where mill owners and railroad magnates provided low-cost housing for their workers—and owned all of the businesses in town as well.

The concept has come back, in scaled-back form, as the shortage of affordable housing has become increasingly acute throughout the country, says Katie Fallon, a principal policy associate at the Urban Institute.

“It’s a cost-effective way for employers to bridge the gap between housing costs and wages,” she says.

The tech giants, including Google, Meta, and Apple, are under increasing pressure to help ease the Silicon Valley housing crunch their booming industries largely created. So they are currently investing billions to develop tens of thousands of units of housing, some of which will be priced below market rate. But those units will not be reserved solely for tech workers.

In addition, billionaire Elon Musk is planning to create the utopian community of Snailbrook, TX, outside of Austin, to provide housing for employees working at his companies SpaceX, Tesla, and Boring.

Most employers dabbling in housing are focused squarely on employee retention. At Bozeman Health, a health care provider with 2,400 employees in Bozeman, MT, job candidates frequently decline an offer or back out belatedly due to the high cost of housing in the area, says Brad Ludford, the chief financial officer.

The median list price of a home in Bozeman was $1,147,500 in May, according to the latest Realtor.com data.

“We have heard so many voices telling us they’re leaving or they don’t come here in the first place,” Ludford says.

So the company is investing with a developer in a 168-unit apartment complex under construction on land near the airport in Belgrade, about 15 minutes away. Bozeman Health will lease 45 of the market-rate units from the developer—about 100 beds. They are still working out the details, but Ludford anticipates the company will reduce the rental cost for employees by giving them a rent subsidy through payroll.

The four-bedroom units are designed like college dorm suites in that each of the bedrooms can be locked for privacy and share common space. Individual workers will be able to rent just a bedroom, or a family could rent an entire apartment, Ludford says.

The big risk of employer-provided housing

However, there is a large potential pitfall for workers who secure housing through their employer, says the Urban Institute’s Fallon. If they quit or lose their jobs, that might jeopardize their housing.

“If your housing is tied to your employer, you have to think harder about leaving that job,” she says.

In Bozeman Health’s case, an employee who leaves a job for whatever reason will lose the subsidy, but not the apartment—at least not immediately, Ludford says.

Workers who purchase one of the 99 homes being built in Spencer, IN, by Cook Medical, a medical device manufacturer, will have no commitment to the company. But they will have to adhere to some covenants intended to help keep the homes affordable and available to employees, says Ron Walker, the president of workforce housing for CFC Properties, a Cook Group company.

The homes may not be converted to rentals. If an owner decides to sell within three years of buying, Cook has the option to buy it back at the original purchase price. That’s because Cook is selling the three-bedroom homes at cost—around $200,000—to make them affordable. The median home list price in Spencer was $255,000 in May, according to Realtor.com data.

And finally, owners who decide to sell in years four through eight can do so at market rate. But they must give Cook the first right of refusal, Walker says.

“If you get presented with an offer, we have seven days to match that offer or pass,” he says.

Cook’s three facilities in South Central Indiana draw employees from several, largely rural counties. Those counties have had low growth rates and, in some cases, the populations are actually declining, Walker says.

That was concerning enough that company executives decided, “Let’s build houses and market those to Cook employees first,” Walker says.

Fourteen homes are completed so far. The first buyers, selected through a lottery process, will move in this summer.

“You have to be an employee on the day you apply and on the day you close on the home, but after that, it’s yours,” Walker says. “We thought, this is worth doing because the community needs the homes.”

Fallon points out that many employers instead offer housing incentives, like help with a down payment or closing costs, rather than an actual living space. But incentives don’t bring down costs and aren’t much help in areas where supply is severely constrained, she says.

“Companies that are creating supply—that’s definitely a benefit,” she says. “It’s one of a number of solutions we need to fix the country’s problem of a lack of housing.”

The post Looking for an Affordable Rental or Home for Sale? You Might Want To Ask Your Employer appeared first on Real Estate News & Insights | realtor.com®.