The Short- and Long-Run Effects of Remote Work on U.S. Housing Markets

The rapid growth of remote work has ushered in a variety of economic changes, with notable impacts on the housing market. An emerging literature suggests remote work has shifted both where people live and how much housing they demand. A period of acute housing market shortages marked by rapid growth in housing prices and rents has led to concerns about the impact of remote work on housing affordability. In a new Economic Innovation Group (EIG) white paper, economists Greg Howard, Jack Liebersohn, and Adam Ozimek examine the likely long-run effects of remote work on housing markets. The results suggest that rents will fall significantly in the long-run as housing supply has time to respond to the increase in demand. Additionally, remote work shifting demand to housing markets where supply is more responsive will result in a larger decrease in rents than would otherwise have occurred.

Executive Summary

The sudden increase in remote work caused dramatic changes in the U.S. housing market between 2020 and 2022. Recent research has documented that remote work raised the demand for housing (Behrens, Kichko and Thisse, 2021; Mondragon and Wieland, 2022); flattened intracity house price gradients (Brueckner, Kahn and Lin, 2021; Ramani and Bloom, 2021); and reallocated demand across cities (Delventhal and Parkhomenko, 2020; Mondragon and Wieland, 2022). During this period, real rents rose by eight percent and real house prices rose by over twenty percent. Short-run housing supply is highly inelastic, so it is natural that rapid demand increases caused rents and prices to rise; however, the long-run effects of remote work on the housing market might be quite different from those which arise during a period with little opportunity for home construction.