As the cost of housing skyrockets, an increasing number of employers provide employee housing or housing subsidies. 

According to the Urban Institute, available and affordable housing helps employers attract and retain employees and makes communities more attractive to new companies and those seeking to relocate. In addition, affordable housing increases employee productivity and job satisfaction.

Housing assistance takes different forms. Some employers provide mortgage or rent assistance. But in Western Colorado, many employers offer traditional employee housing in employer-owned properties. This is especially common in communities with high costs of living or geographically remote operations and for recreational and agricultural employers.

In 2020, Aspen voters approved a $94.3 million bond issue that earmarked nearly half to housing for teachers. At the end of 2021, the Aspen School District housed 69 employees, or 26 percent of its staff. The district aims to provide low-cost housing to 54 percent of its employees by 2023.

Legal issues arise when providing housing to employees, including two significant issues I’d like to address.

First, an employer may provide housing to employees for either the employee’s or employer’s benefit. Many employers want to include the value of the provided housing in the employee’s wages. 

The Fair Labor Standards Act allows employers to take a credit toward an employee’s wages for the fair market value of the provided housing. But the FLSA requires that all five of the following elements are met:

The lodging is regularly provided by the employer or similar employers.

The employee voluntarily accepts the lodging.

The lodging is furnished in compliance with applicable federal, state and local laws.

The lodging is provided primarily for the benefit of the employee rather than the employer.

The employer maintains accurate records of the costs incurred in furnishing the lodging.

The two elements usually in question are whether the employee accepts the housing voluntarily and whether the housing benefits the employee or employer. An employer who offers optional employee housing to employees who’d have difficulty obtaining affordable housing can usually take credit toward legally required wages for the fair market value of the housing. But an employer who requires an employee to live on the employer’s premises to secure or oversee the premises or be available to provide services on the premises at short notice provides the housing for the employer’s benefit. The employer must pay the full wage owed the employee.  

In addition, this credit is not available toward the salary required for an exempt employee. The employer may provide lodging as part of the exempt employee’s total compensation, but it still must pay the exempt employee the minimum cash salary required by federal and Colorado wage laws.

Another issue that arises is the characterization of the housing arrangement. Under Colorado property laws, tenants have greater rights than “licensees” — people whom the property owner gives limited permission to use or occupy a property. 

Many employers enter into property leases with employees. But what happens when the employee separates from employment? The lease is an arrangement separate from the employment relationship. And leases are like marriages. It is much easier to form them than dissolve them. The employer must follow all the legal requirements for an eviction if the employee doesn’t leave the housing voluntarily. Moreover, the employee may remain in the housing until a court issues — and the property owner executes — an eviction order.

Colorado law allows an easier alternative for employers who offer housing to their employees. Under Colorado Revised Statute 8-4-123 (Colorado Wage Act), an employer may enter into a license agreement for the employee to occupy the premises rather than a residential lease when it provides housing as part of the employee’s compensation so long as the agreement is in writing and includes several basic elements outlined in the statute.
An employer may terminate the license simply by giving the occupant three days’ notice. If the occupant doesn’t vacate the premises, the employer may call the county sheriff to remove the occupants upon showing the sheriff or sheriff’s deputy both the agreement and written notice the employer served the occupant. The employer avoids the lengthy eviction process, and the property is available for a new employee. 

This license to occupy is available only when the employer provides housing as part of the employee’s compensation and the housing arrangement is part of the employment relationship. An employer who provides low-cost housing to employees without including the fair market value of the housing or reduction in cost of the housing in the employee’s compensation may not take advantage of the license to occupy.  

Employer-provided housing raises multiple legal issues. Employers who wish to provide employee housing should consult an attorney before establishing this relationship with employees or entering into lease or license agreements with employees. The Employers Council provides counsel on these matters to its members as part of membership or at reduced rates.