Housing the Company Way

By Kenneth M. Pierce

Coping with the high cost of moving employees

When the Marriott Corp. offered Robert Souers, 38, a job last summer, he talked salary and benefits for a few moments and then popped the big question: "What about relocation? Let's not continue to talk if there isn't a good relocation plan." Marriott was facing a problem that increasingly worries corporations throughout U.S. business: employees are reluctant to move because of the stratospheric cost of housing and mortgages.

Souers had an attractive 8 3/4% mortgage on a four-bedroom colonial house in River Edge, N.J., that had cost him $68,000 in 1977. He was working in New York City for the Sperry Corp., but Marriott wanted him to move to its corporate headquarters in Bethesda, Md., outside Washington. Says Souers: "I wanted to be sure that my pay increase was not completely eroded by the high housing costs and the expense of living in the Washington area."

Marriott, though, was prepared for the problem. In addition to the salary increase, it offered to buy Souers' New Jersey house for a price determined by averaging two independent appraisals, to pay up to a five-percentage-point difference between his old mortgage and a new one, to pick up all the closing costs connected with the sale of the two properties and to pay for two house-hunting trips.

Souers and his family are now settled in a five-bedroom colonial house that cost $153,000 and has a 13.5% mortgage. Says he: "If Marriott had not offered the generous relocation benefits, I would not have moved. It would have meant either decreasing my quality of housing or decreasing my life-style."

U.S. firms are being forced to use similar creative--and expensive--gimmicks to induce employees to move or to hire new executives. While in the past most employees jumped at a transfer as a sign that they were on the corporate fast track, many of them are now wary of moving. Robert D. Kunisch, president of Homequity, a Wilton, Conn., executive transfer service, estimates that as many as 20% of the people offered job transfers are declining them. Says Richard Bastron, compensation manager for Getty Oil Co.: "If a company told you to move 15 years ago, you asked, 'Where?' Now when employees are told to move, they ask, 'How much?' "

The Washington-based Employee Relocation Council, whose members include 800 companies that transfer some 300,000 employees yearly, reports that two-thirds of its firms offer transferred employees some form of home purchase-price guarantee. Some 76% of them will also pay employees a mortgage-interest differential to compensate for higher rates on new home loans. Employees must pay more taxes on such extra money, but companies frequently compensate for the additional tax bite. A decade ago, only 55% of firms provided for sale-price guarantees, while just 12% gave a mortgage supplement.

Such employee benefits have dramatically increased relocation budgets for corporations. It currently costs about $30,000 to transfer an executive within the U.S., a nearly fourfold increase since 1973, according to the Relocation Council. As a result, many firms are cutting back on corporate moves. During the mid-1970s, IBM transferred 8,000 of its 157,000 domestic workers annually, and wags used to say that the company's initials stood for "I've Been Moved" rather than International Business Machines. But this year, though its work force has increased by about onequarter, the office equipment giant will transfer only 6,000 employees. In addition, the firm has set a limit of three transfers per employee per decade. Nevertheless, the Relocation Council says that no cutbacks in moves are planned by roughly half its member firms. Aerospace, computer and energy companies say that the scarcity of seasoned employees makes transfers inevitable.

The high cost and high pain of moving has resulted in the growth of a number of specialty companies that buy old homes, help find mortgages and new homes and, sometimes, assist spouses in finding work in their new locations. Says Gaylord Milbrandt, executive vice president of Runzheimer and Co., a Wisconsin-based relocation consultant: "Business has just been phenomenal." With 13 offices nationwide, Merrill Lynch Relocation Management helps transfer some 35,000 families of other companies yearly. It bills employers for brokers' commissions and real estate closing costs, plus its own fee of about $2,000 a sale.

A number of companies operate their own relocation departments. Hughes Aircraft Co. in Southern California has an internal program that aids employees in their house hunts. Some firms, though, are facing an unexpected and serious problem: a large stock of unsold homes that the companies have been forced to buy from employees who have moved to new locations. California's Intel Corp., for example, now has up for sale homes worth more than $7 million. General Motors has 112 homes in the currently depressed Detroit housing market, and the automaker is giving away new 1981 General Motors cars as a bonus to buyers. A free Cadillac (value: $18,300) will go to the new owner of a three-bedroom ranch house in exclusive Bloomfield Hills that is priced at $204,000; a less commanding Chevette (value: $7,000) goes along with a three-bedroom colonial in a Canton Township suburb for $78,500.

The automaker's strategy has set off daydreaming by other corporate homeowners. Says Clifford Ehrlich, senior vice president of Marriott, which has an inventory of 76 unsold homes: "We could offer home buyers a free week in Santa Barbara at a Marriott Hotel." Executives at AMF, which even owns an employee's former home on Mount St. Helens, toyed with the idea of offering its Trac 14 catamarans or AMF-made snowblowers to anyone who would buy one of its 60 homes.

A few firms have experimented with buying houses or apartments for their top executives. In 1980, ITT agreed to pay the interest on a loan of up to $950,000 so that its new chairman, Rand Araskog, could buy a New York City coop. Walt Disney World maintains about 40 apartments in Orlando, Fla., and Burbank, Calif., as well as a fleet of trailers, that are used as temporary residences by employees. This concept has not been widely adopted by corporations because the housing needs and desires of executives vary greatly--and there are hazards and headaches aplenty in being a landlord.

Companies are also trying to establish programs that recognize the cost of living differences among American cities. An executive transferring from Detroit to the booming Santa Clara Valley in California will find that the cost of nearly everything is more expensive in his new location.

One answer to this problem is to establish a cost of living differential for each U.S. city where the firm has employees. Runzheimer and Co., for example, estimates that someone earning $39,000 annually who has a family of four, a four-bedroom house and two cars, will earn a bit more than his ordinary expenses, including housing, taxes and transportation, in a city like Jacksonville, Fla. But the person would have to spend about $7,600 more to maintain the same life-style in San Francisco. Runzheimer recommends that if a company transfers an employee from Jacksonville to San Francisco, it give him a cost of living salary increase of $7,600. Such firms as IBM, Monsanto and General Mills have now adopted the Runzheimer program. More and more corporations are recognizing that they must adopt similar approaches, if they want executives to pack up and move off to that new job. --By Kenneth M. Pierce. Reported by Barbara B. Dolan/New York and Maureen Dowd/Washington

With reporting by Barbara B. Dolan/New York, Maureen Dowd/Washington

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