New Year, New Ways to Incent Domestic Relocation!

    Jan 06, 2022 @ 01:10 PM / by Jessica Caligan


    Relocating Trends

    Since the start of the pandemic, the United States has experienced unprecedented spikes in real estate values with average home values increasing over 17% in just 18 months. Some key markets have seen spikes upwards of 50%.  

    These new market trends pose a serious challenge for companies relocating talent domestically. Traditionally, domestic relocation packages have been structured to get people out of their houses quickly. This stems from old market norms where houses could take months to sell, and companies needed talent to relocate quickly. This structure has been effective in the past but is challenging today when most homes sell in a weekend and market values are at all-time highs.

    Now we find ourselves with an inverse problem, where selling properties is easy but procuring a new one is incredibly difficult.

    View from Tank Hill Park, in San Francisco, California.

    Let's look at a real world example. You have key operations in the Bay Area and need to relocate a mid-level professional from New Jersey. The individual makes USD 150,000 today and is being offered USD 180,000 to relocate to the Bay Area for a key research role that cannot be performed remotely. Today that individual lives in a 3-bedroom home in the quaint suburb of Morristown that was purchased for $450,000 5 years ago. In the current market climate, this home will likely sell for $550,000. Their monthly mortgage payment is roughly $2000 per month and they yield just over $220,000 in equity from the sale.

    The employee is looking to relocate to the San Francisco suburb of Piedmont, which has good schools but can still be a long commute. A comparable accommodation here is a condo rather than a freestanding home, which will be an adjustment for a family with young children. The cost for a 3-bedroom condo in Piedmont is just over a million dollars. With their current down payment, this will double the monthly mortgage.

    USA, California, San Francisco, - LMB-139156-edited-248447-edited

    Here lies the challenge. How do you structure a domestic relocation benefit that will set this key talent up for success, when the thing they need the most assistance with is no longer getting them out of their home? Recently, we have spent a lot of time delving into this problem and defining new and creative ways to structure domestic packages. The goal is to maintain current spend but deliver it in a way that focuses on getting that individual into their new home and tackles the root of the problem.

    Does this sound familiar? We would love to hear more about how you are adapting your program to be more market and talent aligned!

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    Topics: Cost of Living, Mobility Policy, Global Mobility, Workforce globalization, exchange rates, Remote worker, Global Compensation, Calculate cost of living allowance, host plus assignments, Local-Plus

    Jessica Caligan

    Written by Jessica Caligan

    Jessica currently leads AIRINC’s Product Management team. Jessica joined AIRINC in 2006 as a client engagement team member, where she provided comprehensive support and partnership for a diverse base of managed expatriate programs with ongoing policy, data, strategy and administration for over 12 years. During this time Jessica completed two international assignments in AIRINC’s European Headquarters in Brussels, Belgium, served as AIRINC’s Pharmaceutical Mobility SME and lead client teams supporting numerous Fortune 500 companies. In 2019 Jessica transitioned to a leadership role in AIRINC’s Product team, bringing with her extensive industry and client experience. Jessica maintains responsibility for AIRINC’s market research initiatives and product planning process. Jessica received her B.A. in Latin American Studies and Spanish from Gettysburg College in 2006.