What Is Corporate Housing and Who Is It For? All the Pros and Cons Explained!

2024-10-14

Many job seekers may encounter the phrase “corporate housing available” in their search. This typically refers to a system where the company provides rental housing for its employees. While this arrangement can alleviate financial pressures by covering or subsidizing housing costs, it also comes with some drawbacks. Employees might find it harder to switch jobs if their housing is tied to their employer, and they may have to be careful about interacting with neighbors.

In this article, we’ll explore various types of company housing, detailing their benefits and potential drawbacks. Use this information as a reference to make informed decisions about your employment and housing options.

Properties managed by Village House are available for use as rental company housing. If you’re interested in renting company housing or need assistance with troublesome applications, please don’t hesitate to contact us for support.

What does corporate housing mean?

Corporate or company housing refers to accommodation provided by an employer as part of their employee benefits package. While it is commonly associated with housing for families, it also includes options for single individuals. This type of housing is highly valued among employee benefits due to its affordability, often offering employees housing at reduced costs.

Types of corporate housing

Corporate housing can be divided into two categories: “company-owned housing” and “leased housing”.

Company-owned housing

“Company-owned housing” refers to properties that are owned outright by the company. This type of company housing is often the first image that comes to mind when people think of “company housing.” One of the main advantages is the smooth move-in process for employees, as these properties are owned by the company. However, it also entails significant financial responsibilities for the company, including the initial investment, ongoing maintenance and management costs, and property taxes.

Leased company housing

“Leased company housing” refers to accommodations that a company rents from a real estate owner or management firm rather than owning directly. Leased company housing can vary in scale: a company might lease an entire apartment building or secure individual units based on employees’ preferences and needs. This flexibility can be advantageous for both the company and its employees.

“Leased company housing” does not incur maintenance or fixed costs like those associated with “company-owned housing.” As a result, “leased company housing” has become the predominant choice under the current company housing systems.

Advantages of living in corporate housing

First, let’s look at the benefits of living in corporate housing.

Can save on housing costs

One major benefit of company housing is the potential savings on housing costs. Many companies offer to cover part or all of your rent, which can significantly ease your financial burden.

Additionally, company housing often eliminates the need for a deposit or key money, and some properties come furnished with essential furniture and appliances. This helps keep moving expenses to a minimum. Moreover, since the portion of the rent you are responsible for is deducted directly from your salary, you shouldn’t have to worry about payment.

Easy commute

One key reason companies offer company housing is to ensure that employees can live comfortably, allowing them to focus more effectively on their work. To support this, company housing is often strategically located with convenient access to the workplace. Sometimes, these accommodations are built near the workplace or on the company premises.

No need to search for housing

If you sign a rental contract independently, you’ll first need to visit a real estate agent, view multiple properties, and compare your options. Even if you find a property that meets your preferences, there’s no guarantee that you will pass the rental screening process.

On the other hand, living in company housing simplifies the process significantly. You simply move into a residence designated by the company, eliminating the need to search for properties or navigate rental screenings. Additionally, your status as a “company employee” provides a level of security, ensuring that you won’t be rejected during the rental screening process.

Good security

When providing company housing, ensuring the safety of employees is very important. This often includes features such as properties with auto-locks and assigning female employees to higher floors for added security. While properties with enhanced security typically come with higher rents, company housing can offer these benefits at a more affordable price.

Benefits for the company

When employees live in company housing, it also benefits the company. If the company covers the rent for employees, these expenses can be classified as welfare costs in the company’s accounting records. This classification can lead to potential tax savings, as welfare expenses are often tax-deductible.

Disadvantages of living in corporate housing

On the other hand, there are drawbacks to living in corporate housing as well that need to be considered.

Cannot choose your apartment

Since company housing is provided by the company, employees typically do not have the option to choose their residence. However, if the housing is leased by the company, there may be some flexibility for making requests or adjustments.

It’s worth noting that company housing might come with certain drawbacks, such as older buildings or locations with limited nearby amenities like convenience stores. Additionally, company housing that includes furniture and appliances may not allow employees to select items according to their personal preferences.

Social Security coverage may become inadequate

If rent is deducted from your salary, it can shrink your social insurance payments, potentially leading to lower social security benefits in the future. The employee pension that you receive upon retirement is calculated based on monthly social insurance premium contributions. Consequently, if your contributions decrease, your future pension may also be reduced.

To address this, consider taking proactive steps to prepare for retirement. This could include investing the money saved from reduced rent or setting aside additional savings to ensure a more secure financial future.

Becomes difficult to leave your job

When you leave a job, you will need to vacate the company housing. As a result, if you are planning to resign, you’ll have to search for a new place to live while looking for jobs simultaneously. Given this, it’s wise to consider company housing as an arrangement that assumes a longer-term commitment to the company.

Being mindful of your neighbors

In company housing, your neighbors are typically fellow employees. It is possible that your neighbor could be your supervisor or that a senior colleague lives on the floor below.

This proximity can lead to frequent encounters, including on weekends, so it’s important to maintain a professional and respectful demeanor. Such close living arrangements can sometimes affect your personal life as well. For instance, your family members, like your spouse, might feel uncomfortable interacting with your boss’s family.

Room sharing in corporate housing

Sharing a room in company housing can vary based on the company’s regulations and policies. While company housing is typically designed for individuals or families, some companies may have room-sharing options.

If you’re interested in room sharing with a friend or a partner in rented company housing, it’s important to review the building rules and contract conditions carefully. Consult with the relevant department to ensure that such arrangements are permitted to avoid any potential issues.

Is corporate housing rent subject to taxation?

Moving into company housing can offer potential tax benefits. According to the National Tax Agency’s “Tax Answer,” if a company provides housing to employees, the difference between the actual rent paid and the equivalent rent may be tax-exempt, provided the company receives more than 50% of the equivalent rent from the employee.

The equivalent rent is calculated using the following formula:

“ 1. Assessment standard amount of the building’s fixed asset tax for that year x 0.2 percent

2. 12-yen x (total floor area of the building in square meters / 3.3)

3. Assessment standard amount of the land’s fixed asset tax for that year x 0.22 percent”

(Reference: National Tax Agency | No. 2597 When Renting Company Housing or Dormitories to Employees)

However, if an employee lives in company housing rent-free, the equivalent rent may be considered taxable income. Similarly, if the rent paid is less than 50% of the equivalent rent, the difference between the actual paid rent and the equivalent rent may be taxed as salary.

While company housing may involve some tax considerations, it cannot be said that being taxed is a serious disadvantage. However, it is good to keep in mind that there is a possibility of being taxed.

Properties managed by Village House are available for use as rented company housing. Our specialized staff can assist with the administrative procedures, making the process smooth and hassle-free for you. Additionally, with the option to room share with up to three people, the rent per individual is very affordable.

If you’re interested in rental company housing, please feel free to contact us for more information.

Click here for more information about Village House’s corporate housing.