Researchers estimate that a 10% increase in the number of employees working from home would result in $15 billion in additional housing costs annually. (Photo: Shutterstock)
A new study looks at the impact on remote work for both workers and employers and finds that working from home may have some unanticipated costs. The National Bureau of Economic Research (NBER) researchers noted that with so many employees switching to remote work—and many of them expressing a desire to continue to work from home—experts have been debating the possible savings on office space for employers.
The changes to the workplace brought about by COVID-19 are a big topic of discussion for both workers and employers. And the forced switch to remote work has created new demand for more flexible work arrangements—nearly half of workers in one survey (48.9%) said they would prefer to work from home 1-4 days a week.
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The new paper asks what the move to remote work might mean for housing costs—which could be considered another factor in the cost of doing business, if employers are competing for workers with increased salary demands.
"We ask whether remote households make different choices when facing the same housing market conditions. That is, do households with remote employees consume more housing?" the authors of the study wrote.
Remote workers need more elbow room
The short answer to the researchers' question seems to be "yes."
The NBER study found that remote workers tend to buy larger houses. The researchers theorized that there could be two reasons for this. One would be that remote workers commuted less, and the savings on vehicles, fuel, etc. translated to spending more on housing. The second possibility was that workers were adapting to remote work by expanding space for home offices. The researchers said that the evidence did not support the first theory, and that the need for additional space was the more plausible explanation.
The report was able to quantify the cost differences, and even the size of larger houses: remote workers lived in houses that were 6.2% larger than the houses of non-remote workers. Renters who worked remotely spent between 6.5% and 7.4% more on monthly rent than non-remote workers; homeowners who work remotely spent 8.4% to 9.8% more on mortgage and tax payments than non-remote households. Using those numbers, the researchers estimated that a 10% increase in the number of employees working from home would result in $15 billion in additional housing costs annually.
"For firms, managers often speak colloquially of cost savings from remote work due to reductions in office space," the report said. "But this neglects the fact that remote households need more space to accommodate working from home. As a result, remote work entails a transition from firms' financing of office space to household financing of home workspaces."
What it means for compensation
The paper also attempted to calculate what compensation would be required for a household to shift to remote work. Perhaps not surprisingly, the researchers found that lower-income workers would need a more substantial increase in income to cover the additional housing costs. The only group in the study that would not require additional income to meet housing demands, the report found, was high-income workers.
"Contrary to all other households, top decile households would move to remote work without any additional compensation," the report said. "This is primarily due to these top-decile households spending a lower share of their income on housing than households in other deciles."
The report concludes by estimating what these findings mean for companies who may have reduced need for office space. The study found that increased housing expenditures would offset about one-third of any savings on office space. The findings are somewhat dependent on geography—the researchers note that cost for office space and housing can vary significantly depending on where a worker or office is located.
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