A friend of mine pays to rent housing from her employer. This housing is owned and managed by the employer and rented only to employees. They agreed upon a rent of $X per month when she moved in and after about 6 months, the employer is now claiming that the rent is significantly below market value and her pay stubs now list an additional $400 per month in employer paid benefits in the form of a housing subsidy. The employer claims that the market value of the rental unit has increased due to "increased nearby amenities".
Needless to say, my friend is extremely unhappy about this because the tax implications will result in her housing costs increasing by over $100 per month. The employer insists that their hands are tied on this matter and it's purely tax law at work and they don't have a choice but to declare this added paid benefit.
I'm not an accountant but my view on this is as follows: Anyone can rent a housing unit for any price, as long as its agreeable to both the tenant and landlord and all tenancy laws are followed. So with that in mind, it would appear that the employer is simply looking to write-off this supposed discrepancy between the current rent and the 'market value' to pay fewer taxes and those tax savings are coming at the expense of the tenants. It seems like an underhanded way to indirectly squeeze more rent from the tenants. It really does seem like a cash grab, as they are also claiming her parking spot at the residence is priced below market value and that is listed as a paid benefit too.
Is this view correct? If the employer wanted to do right by their employees, could they choose NOT to declare this supposed housing subsidy as a paid benefit? Or are their hands truly tied here by some tax law?