Fostering a Healthier, More Engaged Workforce: How Hospitals Can Leverage Housing To Attract And Retain Talent

Staffing is a top challenge for U.S. hospitals, with many struggling to attract and retain qualified employees, whether they are nurses, residents or support staff. There are many causes for this, but housing availability is often cited as a reason why talented applicants turn down job offers or have short tenures, says Milton Pratt Jr., executive vice president of development at The Michaels Organization.

Especially in high-growth markets, a lack of quality housing stock combined with historically high rent levels are pushing both seasoned professionals and new graduates to consider other employment options.

“Hospitals that struggle with high turnover tend to use traveling nurses, which garner higher salaries and also require room and board,” Pratt said. “It’s very expensive.”

Danielle Bergner, a partner at Hall Render, a national healthcare-focused law firm, said the trend can have a negative impact on a hospital's ability to fulfill its core mission. 

“It’s become an issue for healthcare organizations because it has started to impact the services those organizations are able to offer,” she said. “If the people hospitals want to hire cannot find housing, the hospital simply cannot fill those positions.”

As a result, hospital recruiters and administrators are seeking housing-targeted solutions that both improve a hospital’s ability to recruit and retain staff and boost hospital work culture, Bergner said.

The Michaels Organization, a developer of affordable housing for more than 50 years, is also focused on providing more attainable housing as a solution to hospitals’ staffing challenges.

“Attainable housing is specifically designed to meet the needs of middle-income workers and their families that don’t qualify for traditional subsidized housing but are priced out of market-rate housing,” Pratt said.

This demographic earns anywhere from 61% to 140% — and even as much as 250% — of area median income in a particular market area, he said.

“Often referred to as ‘the missing middle,’ these are essential workers who get up and go to work during global pandemics: firefighters, police officers and teachers, and increasingly, healthcare workers,” Pratt said. “There is no existing program tailored for them.”

Pratt is a senior leader of Michaels’ development that is focused on both Low-Income Housing Tax Credit-financed affordable housing and attainable housing. Michaels seeks to achieve lower rents through close collaboration with anchor institutions like hospitals.

“Most hospital administrators don’t want to be in the apartment development business, but they realize they have a problem,” Pratt said. “That’s where we come in.” 

The Michaels Organization brings decades of experience operating residential communities of this type, he added.

“Hospitals are great at taking care of patients, but they are not great at being multifamily apartment designers, operators and financiers,” Pratt said. “We are.”

Listening, And Listening Again

The Michaels Organization helps hospital systems deliver housing for their staff to ensure employees can work, live and play in proximity and avoid getting burned out from hours-long commutes, Pratt said.

The collaboration starts with listening.

“When I meet with hospital administrators, I’m doing what my mother always told me to do: ‘Listen, listen again and then listen a third time,’” Pratt said. “I want to figure out what their goals are and what their financial constraints are.  We also do more formal surveys and focus groups with their recruiters and heads of HR.”

This helps the company’s development experts tailor their proposed apartment community designs and capital stack to a given hospital’s specific needs, he said.

“Each of our healthcare projects is like a snowflake: unique,” Pratt said. “They all get financed differently. We listen and come back with a structure that works. Some get financed with conventional equity and debt, some with a nonprofit execution with taxes and bond financing.”

However, all the projects fit the criteria of attainable housing because they do not involve the use of federal tax credits, HUD funds or Community Development Block grants, he added.

And while the unit mix and designs vary, these are high-quality communities with highly desired amenities, Pratt said.

“Community gathering spaces and fitness centers as well as dog parks, bike lockers, security features, an automated package room and even a shuttle between the healthcare facility and the apartment community, are among the amenities we like to include in our attainable housing community,” Pratt said.”We can also plan for a daycare center if there is a need for that service as well.”

The goal is to provide a positive living experience in addition to holding down rents. For instance, in communities where residents are likely to live with roommates, Michaels will provide two-bedroom apartments with two ensuite primary bathrooms, Pratt said. 

Land, The Overlooked Resource

Pratt said Michaels’ approach to attainable deals rests on three pillars: low-cost land, property tax exemption or abatement, and reduction of other kinds of fees, such as for sewers and utilities or zoning permits.

“The cost of land doesn’t necessarily have to be zero, but it has to be low,” he said. “Luckily, the hospitals we work with often own vacant sites or underutilized older buildings, which can be demolished to make way for housing.”

The goal of leveraging the three pillars in some combination is to reduce rent from approximately $2,000 per month to $1,500, Pratt said.

Because the reduction is less than what would be necessary for a traditional affordable housing development, where target rents are closer to $500 per month, deals are able to pencil without federal sources of financing.

Fortunately, Hall Render's Bergner said, many hospitals have one important asset in abundance. 

“Land is the No. 1 overlooked asset hospitals can leverage for these kinds of projects,” Bergner said. “They don’t have giant coffers of millions of dollars to pour into housing, but they have land. That can get a developer halfway through the capital stack gap they need to fill.”

Working with an experienced partner rather than going it alone can save a hospital system from unforeseen issues and costly headaches, she added.

“We advise our healthcare clients to carefully pick the partners they work with and then leverage the expertise of those partners to examine the land assets the organizations have at their disposal,” Bergner said. “It’s about structuring the deal the right way, with the right partners, and allocating the risk appropriately.”

For instance, The Michaels Organization advises its partners to avoid leveraging federal tax credits for developments geared toward an organization's employees. 

“Most employers want to see a building that’s solely and exclusively for their own employees. But if you develop using federal tax credits, that’s not possible,” Pratt said. “You have to open it up to everyone."

While the attainable housing model means units are available exclusively to hospital employees, it isn’t based on free housing and the hospital isn’t master-leasing the building, he added.

“Rents are somewhat below market, but the employee still shoulders the personal responsibility of paying the rent, having their name on the lease and having a choice about where to live,” Pratt said.

The benefit for the hospital? 

“A healthier, more engaged workforce, and a powerful way to both attract and retain talent, while showcasing a culture that cares about all aspects of your team’s well-being,” Pratt said.

Once healthcare organizations see traction at one facility, they tend to want to replicate the model at other sites, Bergner said. 

“Several of my clients have done multiple housing projects,” Bergner said. “They dip their toes in with a first effort, see the results and want to do it again. It doesn’t fix all the issues, but it takes away a source of pressure.”

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​This article was produced in collaboration between The Michaels Organization and Studio B. Bisnow news staff was not involved in the production of this content.

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