(FORTUNE Magazine) – Business must take a bigger role in attacking the critical shortage of affordable housing in several regions of the U.S. In areas where home prices and rents are out of reach for many of their employees, companies find themselves facing a dismaying choice: They can close up shop and relocate to a lower-cost area, in the process running up an exorbitant bill. Or they can stay put and pay progressively more to get and keep the personnel they need. High real estate prices are so widespread that already some 50 major employers make housing assistance a regular part of their employee benefits package, at least for supervisors and office staff. A few are going further to pour corporate funds directly into promoting the construction of less expensive housing units. It's high time that such efforts on the part of the business community become more organized. The harm that businesses and their employees suffer from unaffordable housing is most obvious in regions such as New York and New Jersey, California, New England, and the Washington, D.C., area. Soaring home prices and rents have caused families to pull up roots and seek jobs elsewhere, increasing employee turnover. They also discourage potential job applicants from moving into the region. Any company with a heavy investment in facilities in such an area and a reluctance to uproot its work force is compelled to pay high wages to recruit new people. If it wants to bring in a company employee from elsewhere in the country, it faces hefty relocation expenses, if it can persuade the employee to relocate at all. When mounting home prices and rents force workers to locate farther from the job, their longer commutes often result in increased lateness and diminished productivity. More than two million families with a household head in his or her prime home-buying years -- age 25 to 40 -- have been priced out of the market in the Eighties. The percentage of the family population owning a home has declined from 66% in 1980 to 63%; among families of prime home-buying age, it has declined even more dramatically -- by a percentage point a year. In part those ! figures reflect an increase in the number of single-parent families, many of them lacking the income for home purchases. But even an offsetting increase in two-income families hasn't stemmed the decline of home ownership. Many studies, including one by the MIT-Harvard Joint Center for Housing, show that cost, not choice, is the driving force behind the trend. In response to the lack of affordable housing, companies are establishing assistance programs far more ambitious than the financial aid traditionally provided key personnel relocating at the company's behest. Colgate-Palmolive has one of the most inclusive programs -- a mortgage assistance plan open to any salaried worker employed for six months or longer, some 35% of the people on its payroll. Colgate arranges for its employees to obtain mortgages through a single mortgage banking firm; Colgate pays the full loan origination fee on loans up to $168,700, and any fee over 1% on larger loans. In a real estate market like New York City, that can save a buyer a cool $3,600 on a typical deal. Another popular form of employer assistance is an up-front payment to the lender to buy down the interest rate the employee must pay. Companies in at least 20 cities are putting up money in partnership with foundations, nonprofit housing corporations, and local and state government to build low-cost dwelling units. Such partnerships now exist in Baltimore, Boston, Chicago, Cleveland, Denver, Hartford, Los Angeles, Newark, New York, and San Francisco. IN SAN FRANCISCO, 21 national and Bay Area companies have joined with the nonprofit Bridge Housing Corp. to capitalize a development fund that, in only 5 1/2 years, has underwritten the production of 2,361 housing units valued at more than $202 million. Families with middle incomes have been able to purchase two-bedroom homes for $89,500 that would have sold for more than $140,000 at market rates, or to rent apartments for $300 to $400 a month that would have cost them $500 to $700 otherwise. This housing isn't reserved specifically for employees of the companies donating the funds (such direct benefit from a charitable donation is illegal), but Bridge does actively market the units to their families. The Boston Housing Partnership, an organization similar to the one in San Francisco, has rehabilitated 800 units in more than 70 apartment buildings. If companies made a more concerted effort, such housing might even have a competitive impact on housing prices in a region. | The trend toward employee housing benefit programs could get a push from organized labor. Local 26 of the Hotel and Restaurant Employees, covering the Greater Boston area, plans to include such a program in its bargaining demands this fall. Five modest changes in federal law would be helpful in encouraging companies to take a greater hand in housing: -- Federal law regulating personnel benefits should specifically authorize housing benefits as a legitimate business expense, ending any concern company lawyers may have. -- Housing assistance benefits should be tax-free to the employee, much as some other benefits are now. -- Corporations starting housing programs should be explicitly permitted to adopt what I call employee home ownership plans (EHOPs) on the same tax- advantaged basis as now obtains for employee stock ownership plans (ESOPs). EHOPs would use shares of stock contributed by the company as collateral for borrowing money that in turn could be loaned out to employees for mortgages. Banks lending money to EHOPs would get the same 50% tax write-off they get for loans to ESOPs, permitting them to offer below-market interest rates. -- A national employer-assisted housing demonstration project should be funded in federal housing legislation. -- Federal tax codes should permit employees to make a one-time tax-free withdrawal of funds from certain classes of benefit plans if these funds are used as a down-payment on a first residence. Some of these suggestions are being recommended to Congress in the long- awaited report issued in March by the National Housing Task Force, a bipartisan commission set up at the request of Senators Alan Cranston (D- Calif) and Alphonse D'Amato (R-NY). At least a few are likely to be included in the next round of housing legislation. Business leaders could increase their ability to push such proposals by creating a national business committee for affordable housing. The committee could create a clearinghouse for information about corporate housing initiatives, lobby on behalf of moderately priced housing, and coordinate corporate activity on this issue. The alternative is for companies to remain at the mercy of real estate prices that continue to spiral dizzyingly upward.