America’s work-from-home capitals are in a sorry state
Across America city budgets are under strain; remote working exacerbates the problem.
DESPITE EFFORTS to pull staff back to the office, remote work has become entrenched in America. City centres have recovered, but only partially. On average, 15% of workers across the country’s biggest metropolitan areas toil at home on most working days. In some places the share is close to a quarter. They may continue to live and work in a city, or from a house in its suburbs, but they are less likely to commute to its centre. City officials knew that this would change the economics of their downtowns. But the full effect is only just appearing, as office leases signed before the pandemic expire.
Across America city budgets are under strain; remote working exacerbates the problem. In Austin and Denver—metro areas where 23% of workers usually work from home—more than a quarter of city office space is vacant, the highest share among big cities in America. That reduces tax revenue. Austin expects commercial- and residential-property values, on which taxes are assessed, to fall by 10% next year, to $212.7bn.
Other WFH centres are having similar problems. More than 20% of employees who live in the metro areas of San Francisco, Portland, Oregon and Seattle work mostly or entirely from home. San Francisco’s office-vacancy rate has climbed faster than that of any other major city in America since 2019. Economists have projected that changes since the pandemic could cost the city between $150m and $200m annually from 2023 through 2028, worth 5-6% of property taxes.
Quieter cities also mean less spending on transport, food and services. San Francisco has had one of the slowest recoveries in foot traffic to offices of any city in America, according to Placer.ai, a data firm. Before covid the city’s transport agency got more than half of its budget from fares and parking fees. But now those revenues account for around 30%, leaving a ballooning deficit.
Some WFH hotspots attracted new residents from other parts of the country during covid. Denver and Austin were among the magnets. But this migration has slowed and borrowing costs have meanwhile risen. That is depressing housing prices and may eventually weaken the tax base. Denver and Austin now have some of the highest shares in America of houses whose sellers have reduced their asking prices, says Parcl Labs, a property-technology firm. In Portland and Seattle nearly half of residential listings have discounted asking prices. Eventually, that will mean that tax revenues are lower than they would have been otherwise.
Denver has already imposed public-sector hiring freezes and lay-offs. San Francisco’s city government plans to cut jobs and services. After voters in Austin rejected a proposed 20% rise in property-tax rates, the city is preparing to reduce funding for parks and emergency medical services. Work-from-home capitals are not the only cities facing budgetary pressures. According to Pew Charitable Trusts, a non-profit, at least 20 of the country’s 25 biggest cities have reported budget shortfalls for the current fiscal year. WFH adds to the burden. Though most Americans would rather forget the pandemic, its cities are still feeling its consequences.
DESPITE EFFORTS to pull staff back to the office, remote work has become entrenched in America. City centres have recovered, but only partially. On average, 15% of workers across the country’s biggest metropolitan areas toil at home on most working days. In some places the share is close to a quarter. They may continue to live and work in a city, or from a house in its suburbs, but they are less likely to commute to its centre. City officials knew that this would change the economics of their downtowns. But the full effect is only just appearing, as office leases signed before the pandemic expire.
Across America city budgets are under strain; remote working exacerbates the problem. In Austin and Denver—metro areas where 23% of workers usually work from home—more than a quarter of city office space is vacant, the highest share among big cities in America. That reduces tax revenue. Austin expects commercial- and residential-property values, on which taxes are assessed, to fall by 10% next year, to $212.7bn.
Other WFH centres are having similar problems. More than 20% of employees who live in the metro areas of San Francisco, Portland, Oregon and Seattle work mostly or entirely from home. San Francisco’s office-vacancy rate has climbed faster than that of any other major city in America since 2019. Economists have projected that changes since the pandemic could cost the city between $150m and $200m annually from 2023 through 2028, worth 5-6% of property taxes.
Quieter cities also mean less spending on transport, food and services. San Francisco has had one of the slowest recoveries in foot traffic to offices of any city in America, according to Placer.ai, a data firm. Before covid the city’s transport agency got more than half of its budget from fares and parking fees. But now those revenues account for around 30%, leaving a ballooning deficit.
Some WFH hotspots attracted new residents from other parts of the country during covid. Denver and Austin were among the magnets. But this migration has slowed and borrowing costs have meanwhile risen. That is depressing housing prices and may eventually weaken the tax base. Denver and Austin now have some of the highest shares in America of houses whose sellers have reduced their asking prices, says Parcl Labs, a property-technology firm. In Portland and Seattle nearly half of residential listings have discounted asking prices. Eventually, that will mean that tax revenues are lower than they would have been otherwise.
Denver has already imposed public-sector hiring freezes and lay-offs. San Francisco’s city government plans to cut jobs and services. After voters in Austin rejected a proposed 20% rise in property-tax rates, the city is preparing to reduce funding for parks and emergency medical services. Work-from-home capitals are not the only cities facing budgetary pressures. According to Pew Charitable Trusts, a non-profit, at least 20 of the country’s 25 biggest cities have reported budget shortfalls for the current fiscal year. WFH adds to the burden. Though most Americans would rather forget the pandemic, its cities are still feeling its consequences.
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