9_Work From Home Flashcards
What was a major Covid-era change to the housing market?
The widespread adoption of work-from-home (WFH) technology.
Why did Covid accelerate WFH adoption despite the technology not being new?
Covid forced firms and workers to adjust and improve coordination, leading to persistent changes in WFH usage.
How did job postings change in relation to WFH after 2020?
Vacancy postings that explicitly offered hybrid or fully remote work rose sharply in multiple countries.
How did trips to CBDs in New York, San Francisco, and Madison change post-Covid?
Trips to CBDs declined sharply during lockdowns and remained below pre-pandemic levels.
How did trips to downtown areas differ between large and small cities post-Covid?
Large cities saw a larger decline in visits relative to smaller cities but later recovered somewhat.
How did Covid impact restaurant and retail foot traffic in major U.S. cities?
Foot traffic declined significantly, especially in downtown areas, while suburban areas were less affected.
What are two ways WFH impacts the spatial structure of cities in the monocentric model?
1) Reduction in commuting costs (↓ t), 2) A tax on living space due to home office use.
What does Duranton and Handbury (2023) suggest about WFH’s impact on city structure?
WFH may lead to reduced commuting costs and changes in housing demand due to increased home office use.
How does the monocentric model conceptualize the effects of WFH?
1) Reduction in commuting costs (↓ t)
2) A tax on living space, meaning residents effectively get less usable space due to home office use.
What is the ‘closed city’ assumption in the context of WFH?
The number of residents is fixed, and the housing stock does not change in response to WFH.
What happens to the rent gradient when commuting costs decrease, assuming constant utility?
The rent gradient flattens, meaning land prices decrease more gradually as distance from the city center increases.
How does the rent gradient change when considering the full effect of WFH?
Housing prices increase in central locations due to higher demand, but land farther from the center becomes more attractive, leading to an overall shift in the bid-rent function.
What major change did COVID-19 bring to the housing market?
Widespread adoption of Work from Home (WFH) technology, forcing firms and workers to adapt, possibly leading to persistent changes in housing demand.
How did job postings offering remote work change after 2020?
The percentage of job postings offering hybrid or fully remote work rose sharply in several countries, including the UK, US, Australia, Canada, and New Zealand.
How did trips to CBDs change post-pandemic?
Visits to CBDs declined significantly during lockdowns and recovered partially, but not to pre-pandemic levels.
How did WFH impact trips to downtown areas in large vs. small cities?
Larger cities saw a sharper decline and slower recovery in downtown trips compared to smaller cities.
How did restaurant and retail foot traffic change in major US cities?
Dining, entertainment, and retail foot traffic in downtown areas dropped significantly and shifted toward suburban areas.
How does the monocentric model explain WFH’s impact on city structures?
WFH can be modeled as:
A reduction in commuting costs.
A ‘tax’ on living space, as part of housing is repurposed for work.
How do Duranton and Handbury model WFH in a closed city?
They assume a fixed housing stock and analyze WFH’s effects on commuting costs and housing demand.
How does WFH affect rent gradients?
Lower commuting costs flatten the rent gradient, reducing housing prices in city centers while increasing demand in suburban areas.
What is the ‘commuting dividend’ effect of WFH?
It leads to:
A flatter bid-rent curve.
Suburbanization of residents.
A shift in housing prices due to higher disposable income (due to reduced commuting costs).
How does WFH impose a ‘tax’ on housing?
More space is needed for remote work, reducing the effective housing consumption and potentially driving up housing prices.
What are the possible long-term effects of WFH on cities?
Office space may be converted to consumer-oriented uses.
Services requiring in-person interaction may dominate downtown areas.
Suburban expansion with new developments.
WFH effects in Monocentric Model
- With a constant population and a constant stock of housing, average housing consumption is unchanged
- Cheaper housing close to downtown implies more consumption of housing and thus a lower population density in this part of the city.
- More expensive housing prices in the suburbs are synonymous with less consumption of housing per resident and thus a higher population density.
- Benefit of WFH is lowering commuting cost (i.e. “the commuting cost dividend”)
Duranton and Handbury: WFH commuting cost effect
What is the main focus of Brueckner et al (2023) regarding Work from Home (WFH)?
The study models WFH as a technology that allows workers to live in one city but work in another, emphasizing inter-city migration.
What are the two key cases considered in Brueckner et al’s model?
- Cities differ only in productivity – Workers relocate to low-productivity, lower-cost cities while telecommuting to their original jobs.
- Cities differ only in amenities – Workers move to high-amenity, lower-cost cities, leading to higher housing prices in those areas.
How do productivity differences impact housing prices when WFH is introduced?
High-productivity cities experience a decline in prices, while low-productivity cities see an increase in prices as workers relocate.
How do amenity differences impact housing prices when WFH is introduced?
Housing prices rise in high-amenity cities and fall in low-amenity cities, opposite to the productivity-based case.
What did Brueckner et al find regarding WFH’s impact on housing prices?
WFH reduced housing demand in high-productivity cities, causing a decline in prices. This led to capital losses for real estate owners in these cities but gains for renters due to lower costs. Conversely, low-productivity cities saw price increases as more workers relocated there.
What are some potential long-term impacts of WFH on urban housing markets?
Workers may avoid high housing costs in expensive regions, improving affordability. Landowners in downtown areas (especially commercial landlords) may face losses. The growth of urban amenities will shift housing demand – suburban shopping districts may expand, or downtowns may transition into entertainment hubs. Long-run effects depend on housing supply elasticity and worker productivity under WFH.
