In the crucible of the COVID-19 pandemic, our work landscape underwent a seismic transformation. What began as a safety precaution quickly morphed into an extraordinary social experiment, redefining our lives and work.
Matthew E. Kahn, an eminent urban economist, becomes our guide through this profound shift in his illuminating book, "Going Remote: How The Flexible Work Economy Can Improve Our Lives and Our Cities."
As the world grapples with lasting pandemic driven uncertainties, remote work emerges as a lifeline. Kahn's book not only recognizes this shift but delves deep into its profound implications for our lives and cities.
Kahn's keen insight, bolstered by his position as a Provost Professor of Economics at the University of Southern California, and enriched by his expertise in climate change economics, sheds light on how remote work is reshaping urban landscapes.
The urban economic narrative of pre-pandemic days painted a dichotomy: superstar cities thriving economically but plagued by skyrocketing living costs, and post-industrial cities grappling with poverty and population decline.
Enter the pandemic, which transformed our work-life paradigm. Educated workers discovered the potential to be productive and content with less time in the office, liberating them from location constraints.
Kahn's "Going Remote" introduces a new "tale of two cities," exploring the effects of persistent remote work on cities, from New York to Baltimore. With concerns over vacant commercial real estate, the silver lining is the potential conversion of these spaces into residences, democratizing urban living.
This shift holds the promise of revitalizing cities, attracting a younger, diverse population. Cities prioritizing quality of life become magnets for remote workers seeking an ideal home. But it's not just superstar cities; post-industrial cities like Baltimore and Buffalo offer unique advantages.
As upper-middle-class remote workers migrate to these cities, local economies thrive, presenting a vision of a more equitable nation where opportunities transcend select urban centers.
"Going Remote" is more than a book; it's a roadmap to a new way of work and life. In an era where remote work is the norm, Kahn's insights offer hope and practical solutions for a brighter future. It's a beacon guiding us towards a transformed world of work and living.
How do you envision the long-term effects of remote work on the urban landscape, considering the potential conversion of commercial properties into residential spaces in major cities?
MK: Urban mayors now face a more competitive landscape for attracting and retaining footloose work from home people and the firms that employ them. If NYC suffers from rising climate risks or crime waves or high taxes relative to local quality of life then the footloose will be more likely to "run to the hills".
A pro-active Mayor who takes steps to invest in creating a high quality of life city will be able to sleep better at night knowing that the City offers a desired bundle of services and taxes. On some level, this resembles a restaurant competing against rival restaurants on price, quality and cuisine and ambience.
Can you elaborate a bit on the implications of these shifts for commercial and residential real estate markets?
MK: A city features many commercial and residential buildings. The emergence of this work from home culture means that commercial building owners (and their bankers) must make some tough decisions.
Older cities such as Baltimore and Manhattan feature many aging commercial buildings. At a cost, these buildings (or at least some of their floors) can be converted into residential housing.
While young people and middle class people will gain from such conversions, the willingness of real estate investors to bear these upfront costs hinges on the expectation that the Mayor will take proactive steps to build a high quality of life city where people want to live and raise children.
Your book touches on the concept of quality of life in cities. Could you provide some examples of how cities can improve their quality of life to attract remote workers?
MK: You raise a key point here. Quality of life means different things to different people. My 21 year old son values great restaurants and live music. I am 57 and I want safe, clean streets and peace and quiet! My 82 year old mother values great museums and senior friendly activties.
While each of us has our own "conception of the good life,” a city can invest in basic services such as reliable, clean, safe public transportation, low risks in the face of climate change (avoiding extreme heat, air pollution spikes, and natural disaster risk), street safety, and basic services of garbage pickup and reliable access to the power grid. For families with children, access to a range of schooling options and clean, safe public parks contributes to one's well-being.
The rise of the work from home movement in the short run has lowered the tax revenue for cities such as NYC and San Francisco. Such a revenue shortfall makes it more difficult for a Mayor to invest in upgrading a city's services. The rise of work from home makes it even more important for them to invest in upgrading urban quality of life at the same time when cities have less money to invest.
How can they find funding for such initiatives?
MK: Such cities could borrow in municipal bond markets but market interest rates have soared. Mayors do face tough decisions right now as they try to navigate these tradeoffs. Given that Mayors only tend to serve for 4 or 8 years, there are open questions as to whether they have the right incentives to address their city's medium term future.
In your book, you discuss the idea of a "tale of two cities" and how remote work can impact both superstar cities and post-industrial cities. Can you elaborate on the specific advantages and challenges these different types of cities may face in the remote work era?
MK: This passage explores the impact of remote work, accelerated by the COVID-19 pandemic, on different types of cities, emphasizing a "tale of two cities" narrative.
In the pre-pandemic world, urban economics presented a stark divide between post-industrial cities like Baltimore and superstar cities like New York City. Post-industrial cities struggled with deindustrialization, low rents, and population loss. In contrast, superstar cities attracted top talent, featured high rents, and booming economies but also faced housing challenges.
The COVID-19 pandemic forced a societal experiment with widespread remote work (WFH). Educated WFH workers discovered they could maintain productivity and happiness with minimal office attendance, gaining greater freedom to choose where to live and how to structure their days. This newfound flexibility challenged the traditional urban economic narrative.
In cities like Manhattan, concerns arose about vacant commercial real estate towers, potentially causing a decline in rents. However, this situation also offered an opportunity to convert commercial space into residential units, potentially improving the quality of life and attracting a younger population.
Post-industrial cities like Baltimore and Buffalo became attractive destinations for WFH workers seeking affordability, natural beauty, and cultural vitality. This shift could increase local rents and the tax base, promoting economic growth and diversity.
In the end, the rise of remote work has disrupted conventional urban economic narratives, offering potential benefits for both superstar and post-industrial cities, ultimately leading to a more diverse and equitable nation.