Source: Insider —
It’s easy to blame remote workers for the pandemic’s chaotic housing market. Highly paid white-collar employees who exercised their newfound freedom and turned once cheap locales into expensive “Zoomtowns” make for vivid villains.
But a new analysis from the Economic Innovation Group, a bipartisan public-policy organization, argues that, eventually, the shift to working from home may turn into the antidote for the price spikes that we’ve seen. That’s because the places where remote workers are flocking — the Sun Belt region in the Southern US and suburban areas outside big coastal cities — are exactly the kinds of locations that are best-equipped to build cheap housing to absorb the flood of newly remote workers.
“People are able to consider affordability more, while putting less weight on, ‘I need to be near the office,'” Adam Ozimek, the chief economist at the Economic Innovation Group and one of the authors of the paper, told me.
These areas generally offer cheaper land to build on, less red tape for developers, and a strong record of new housing construction, all of which bodes well for their ability to accommodate thousands of new residents. The population shift to these popular remote-working spots will also help alleviate some of the price pressure in major cities such as New York City and San Francisco, which have struggled for years to build enough housing to ease prices. Once housing supply in the newly popular areas starts to catch up to the demand surge created by the pandemic, rents will come down — and they may even end up lower than pre-pandemic levels, according to EIG’s model.
But the march to cheaper housing isn’t imminent. A lot of multifamily apartments and condos are scheduled to be completed in the next year, but those new units won’t be nearly enough to meet the rise in housing demand. Climbing interest rates and recession fears have prompted developers to delay plans for more projects. And while it’s clear that the job market has changed forever, the exact future of remote work remains uncertain — some employers are rolling back their “remote-first” policies and ordering workers back to the office.
Still, there’s reason for optimism. The shift to working from home may have fueled dramatic increases in housing costs earlier in the pandemic, but in the long run, it’ll enable more workers to live in areas where housing is plentiful and easier to build — which is good news for America’s housing market.
Remote work pushed housing trends into warp speed
In some ways, the pandemic’s housing shifts were a long time coming. Americans have been migrating from expensive coastal cities like New York and San Francisco and industrial towns in the Midwest to the Mountain West and the Sun Belt for years. But with many white-collar workers suddenly untethered from their office desks in bustling downtowns, the shift from densely populated cities to places where housing was cheaper went into overdrive. In places like Phoenix; Boise, Idaho; and Charlotte, North Carolina, rents and home prices exploded. Jay Parsons, the head of economics for the real-estate-software company RealPage, said he believed most of these relocations would have happened eventually. But the pandemic lit a fire under many people to go ahead and make the move.
“These are trends that started well before COVID, but it certainly accelerated that shift,” Parsons told me. “We saw just enormous demand from 2020 to 2021 across the suburbs in general, and in the Sun Belt specifically.”