As more companies double down on return-to-office plans, there may be one major reason employees are reluctant to get on board: Many invested big bucks on bigger houses during the pandemic due to their plans to spend more time working from home.
Research from the Federal Reserve Bank of San Francisco finds the shift to remote work drove housing prices higher during the pandemic, accounting for more than half of overall price growth for US homes from November 2019–November 2021. Remote workers tended to spend more on housing than non-remote workers, according to a recent analysis by the Economic Innovation Group (EIG), a bipartisan public policy organization based in Washington, DC. That’s likely because they wanted to buy a bigger place, or ditch roommates for a house or apartment of their own.
Remote workers drove up housing prices. EIG’s research, published last month, points to two factors that drove housing demand—and in turn, rental payments and home values—higher during the pandemic.
The first is a desire for more space. “There’s a really good amount of evidence at this point that people just…want more space when they’re working remotely, whether that’s about being at home and needing the house to be kind of quiet, or about wanting to have room for an office,” said Adam Ozimek, a chief economist at EIG who coauthored the research.
This first factor helps explain why some urban areas saw an “out-migration” during the pandemic, as remote workers left cities to seek out more square footage in the suburbs, explained Eric Carlson, an associate economist at EIG who worked with Ozimek on the research.
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While big cities saw rents drop temporarily at the beginning of the pandemic due to this out-migration, that trend didn’t hold. That’s because remote workers staying in cities helped drive up housing demand by leaving spaces they shared with roommates and seeking out their own homes, Carlson added.
The results of Ozimek’s and Carlson’s analysis, which drew upon data from the US Census, “are consistent with remote work generating increased demand for more space, more home-based amenities, and more privacy,” their paper reads. “Similarly, remote work led to increased demand for one’s own space over living with roommates."
WFH investments. Not only does the EIG research suggest remote workers sought out new homes during the pandemic, it also finds they paid more for them compared to non-remote workers.
Remote work led to about a 20% increase in 2021, according to the research. A non-remote household paying $2,500 in rent each month prior to the pandemic, for example, would see about a $500 increase in 2021 if it went remote, according to this analysis.
With these findings in mind, decision-makers should try to weigh the pros and cons of restricting workers’ ability to work from home, Ozimek told HR Brew.
“Companies need to understand that workers are reorienting their lives around remote work. And they’re making serious and sometimes difficult-to-reverse decisions as a result of the ability to work remote,” he said.
Employers calling workers back into the office risk turnover, he added, “as a result of trying to take back something that workers not only value, but have made significant investments around.”