Trends in Corporate Relocation Policy

These are interesting times…or as Charles Evans, the President of the Federal Reserve Bank of Chicago, said in October, “current circumstances are really extraordinary.”  Fortune 500 companies do not make changes to their benefits and compensation structure without multiple layers of input from operations to accounting to human resources to talent management.  I’ve recently attended several industry meetings where relocation management companies or the in-house managers of corporate relocation programs are doing just that.

In many parts of the country, transferring families are finding it nearly impossible to accept relocations due to the decline in the value of their current home.  I recently posted a story about the huge declines in new hire transfer volume – you can read that here.  For existing homeowner transferees, major corporations are again offering loss on sale protection – making the homeowner whole on the difference between the price they purchased their home for and the price they are able to secure through the buyout or relocation process.  Often this “loss on sale” protection is capped at $20 or $30,000 and is simply not enough.  Thus corporations are now offering transferees the alternative of property management.  As an example, one corporation is offering two years of property management expense reimbursement up to $10,000.  The hope is that in that two year period the market will recover, prices will appreciate and the transferee will be able to proceed with the sale of their home.  The challenge now is finding qualified partners to provide full property management services.

In addition to property management, another trend in corporate relocation policy is to maintain an employee’s homeowner status for their tenure with the company even if they elect to rent in the short term.  The difference in benefit packages provided to current homeowner transferees versus current renters is significant.  The Worldwide Employee Relocation Council survey of relocation expense for 2009 showed the average cost to move a homeowner employee was $90,000 while the average for a renter was less than $21,000.  The problem – many corporations have been incentivizing their employee to purchase in their new location, even when it’s in neither of their best interest.  The employee doesn’t want to lose their future homeowner relocation benefits.  To alleviate this problem a number of corporations are now adopting the “Once a homeowner, always homeowner” position.  This shift in policy is dramatically increasing the need for rental assistance and the level of service expected by those transferees.  Many relocation departments across the country are already equipped to provide these services, it’s just that the demand hasn’t always been there.

Property management and rental assistance are just two examples of recent trends in changing relocation policy – emerging innovative solutions for relatively consistent industry.  These changes will provide some much needed relief, stress and financial, to transferring families.  The questions though, do these changes have unforeseen consequences…if the market doesn’t recover when the property management runs out in two years, then what?  Is the transferring family’s stress and financial hardship just amplified?  Will this shift in corporate strategy just add to an already ominous amount of shadow inventory?  And “Once a homeowner, always a homeowner”.  It makes sense to remove the incentive for employees to make bad purchases, but how many qualified buyers are being removed from the current market?  If you live in a high transferee area, does the policy simply add to your financial stress and days on market?

Interesting times…or should I say “really extraordinary”.  I’d love to hear your thoughts.

Posted by:  Ryan Carrell

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