Seattle-based real estate giant Redfin announced Tuesday that it’s laying off 7 percent of its staff and furloughing hundreds of its agents due to decreased housing demand amid the coronavirus pandemic.
The company is furloughing 41 percent of its real estate agents, of which the majority will go on furlough until September 1, with a transition bonus and health-care benefits through the summer, said Redfin CEO Glenn Kelman in a blog post released today.
Smaller cuts have been made at the company’s headquarters, with “the people who build the technology and programs behind our brokerage” staying on, albeit with a temporary salary cut between 10 – 15 percent, Kelman said. Bonuses for these employees will be canceled for the year.
As of Dec. 31, 2019, Redfin had a total of 3,377 employees and a growth rate of 12.8 percent.
Furloughed Agents May Get More Unemployment Insurance
In addition to decreased housing demand, Kelman said the federal government’s $600 weekly contribution to each person’s unemployment insurance was a secondary factor in the decision to furlough agents.
“Of the field folks leaving, we estimate about 75 percent live in states that will allow them to earn more from unemployment insurance than from Redfin,” Kelman said in his blog post. “This estimate assumes every state opts in to the CARES Act; it doesn’t account for those who, because of their work history, may not qualify for unemployment payments, or for the maximum amount of unemployment payments.”
The company announced the 7 percent layoffs in an SEC filing, filed April 5. In it, Redfin stated it expects to complete its workforce reduction by the end of April 2020, and as a result, incur a pre-tax charge for termination benefits, between $2.9 million and $3.3 million in the second quarter of 2020. The company expects to incur a cash outlay for all of these charges in the second quarter of 2020, according to the filing.
Kelman reiterated his commitment first announced last month in the shareholder letter, to temporarily increasing the fixed portion of agent pay this spring, due to decreased home sales activity. “Even at lower pay, we’ll need [the] team’s best effort to drive demand through our website, so our agent workforce can come back at full strength. We’ll stick with our commitment to pay our remaining agents a higher base salary this spring, so that everyone still working earns a living wage.”
In a letter to shareholders last month, Kelman said he would not be taking a salary through the end of the year.
After the Crisis, Redfin’s Long-Term Outlook
Looking ahead to after the pandemic ends, Kelman noted in his post today that their long-term outlook is strong.
“It’s hard for any business to prepare for an event of this society-shaking magnitude, but we want to be careful not to conflate our short-term and long-term prospects,” Kelman wrote. “Our short-term prospects are glum. But our long-term competitive position is strong. Housing isn’t a fad or a luxury good; demand for a basic need like shelter can only be deferred, and only for so long.”
He said the company will be best positioned in the future due to its technology, such as three-dimensional scans and video technology. He closed his post, thanking the agents.
“The pandemic will end,” Kelman said. “Redfin, and our whole-hearted but still imperfect efforts to care for our employees, will endure. To those who have been asked to leave Redfin today, thank you. I can’t imagine the grief we’ve caused you. I’m sorry we let you down. We’ll fight like wild animals to bring everyone on furlough back.”
To read Kelman’s full post, click here.