The rise of work-from-home towns

The coronavirus pandemic, and the accompanying mass shift to doing white-collar work from home, has led to reports of real estate frenzies in scenic places. The Kingston, New York, metropolitan area — aka Ulster County — which stretches from the Hudson River into the Catskill Mountains, had the fastest-rising home prices of any metro area in the country in the second quarter. In Lake Tahoe and neighboring Truckee, California, brokers complain that they are "running out of homes for sale." In western Montana, out-of-staters have been buying houses sight-unseen, in cash.

One thing these places have in common, other than mountains, is that even before the pandemic they had lots of residents who usually did their jobs from home. Here are the metropolitan and micropolitan areas with the highest percentages of workers who usually worked at home in 2018, according to the Census Bureau's American Community Survey (2019 data will be out later this year).

I've already mentioned Truckee and Kingston, and Bozeman indirectly. Faribault and Northfield are a couple of charming small cities less than an hour's drive south of Minneapolis and St. Paul. Northfield, home to not one but two high-end liberal arts colleges (Carleton and St. Olaf's) and blessed with air that smells like freshly baked cookies when the wind is right, is chiefly responsible for the area's high work-from-home percentage. Most of the other areas on the list are near mountains or beaches and thus somewhat self-explanatory. The Lawton area is home to the US Army's Fort Sill, and yes, most of its work-at-homers report working in military occupations. If you live on a military base, you apparently work at home — which isn't exactly the phenomenon I'm trying to describe here. The Villages, meanwhile, is a fast-growing retirement community with no beaches or mountains but lots of pools and golf courses. Most people there don't have jobs, but a lot of those who do work from home, in many cases probably continuing the work they were doing before they headed south to Florida.

Micropolitan areas, by the way, are defined as having "at least one urban cluster of at least 10,000 but less than 50,000 population, plus adjacent territory that has a high degree of social and economic integration with the core as measured by commuting ties," while metropolitan areas revolve around an urban cluster of 50,000 or more. Some micro areas are so small that the Census Bureau doesn't have reliable work-at-home data for them for 2018, but its five-year estimates for 2014 through 2018 reveal a few more not-all-that-surprising havens for work-from-homers such as Clearlake, California (13.4%), Summit Park, Utah (which includes Park City; 13.1%), Taos, New Mexico (12.3%), and Vineyard Haven, Massachusetts (11.9%). Also near the top of the rankings is Fairfield, Iowa (12.5%), which I had never heard of before but is apparently a creative-class hotbed bursting with startups and transcendental meditators trained at its Maharishi International University.

So this is the future, right? Everybody with a good white-collar job is going to move to some adorable small city, preferably with mountains nearby but cornfields will apparently do, where they'll drink locally roasted coffee and microbrewed beer and go on hikes and bike rides when they're not stuck in interminable Zoom meetings, leaving the nation's big cities to wither.

Or not. These places tend to be, as noted, pretty small (metropolitan Asheville, population 424,858, is the biggest on the above list), and not really prepared to handle a large influx of big-city refugees. Some already tightly restrict development, meaning that new demand will simply mean higher real estate prices that will curtail the inflow, while those like Bend, Oregon, that have been willing to build tons of new housing are beginning to struggle with the consequences of all that growth. Plus, big cities have many attractions too, even if some of them have been off limits since March.

People have fled cities during pandemics throughout history, and generally returned afterward, so their current seeming unattractiveness probably isn't a reliable guide to the future. On the other hand, the current trend toward working from home, or more generally working remotely, has been gaining strength ever since broadband internet began to become widely available two decades ago. The huge boost given by Covid-19 has got to have some lasting consequences.

The data here are from questions that the Census Bureau has been asking Americans since 1960 about how they get to work. The record 5.3% national work-at-home percentage for 2018 misses out on a lot of people who Bureau of Labor Statistics surveys indicate worked from home some of the time, and is way below what the percentage will probably be for 2020. But because the Census numbers are available down to the level of counties, cities and beyond, they can shed a lot of light on where working remotely was already becoming commonplace before the pandemic. And one thing that they indicate is that while places like Truckee and Kingston are certainly part of the working-at-home story, most of the Americans working at home have been doing so in the large metropolitan areas where most Americans live.^[1]

Here are the large metropolitan areas (those with 500,000 employed people or more) with the highest work-at-home percentages in 2018.

A lot of these are the kinds of places where big corporations locate back-office operations (and, increasingly, not-so-back-office ones) to save on real estate and labor costs, or secondary tech industry hubs where similar considerations are at work. Lots of individuals appear to be making equivalent calculations about cost and quality of life.

But there's also the San Francisco area, which is awfully expensive and sure seems like a primary tech industry hub, yet had more residents working at home in 2018 than all of the areas in the first chart combined. Then again, metropolitan San Francisco is not quite as expensive and maybe isn't quite as primary a tech hub as the neighboring San Jose metropolitan area, where the work-at-home percentage is a below-the-national-average 5%. And there's an interesting story in that.

I discovered it after downloading the Census Bureau's estimates of 2014-2018 work-at-home percentages for all the country's cities, towns and census-defined places. After I eliminated the tiniest ones, Fort Leonard Wood, Missouri, another US Army installation, came in first, at 51.6% (give or take an 8.9-percentage-point margin of error) and the aforementioned Northfield was pretty high on the list at 33.7%. As I sorted and re-sorted by various criteria, two things stood out.

One was that some pretty big cities had high work-at-home percentages: Portland (8.2%), Austin (8.1%), Denver (8%), Atlanta (7.8%), Seattle (7.2%), San Diego (7.1%), San Francisco and Oakland (6.6% each). New York City doesn't (4.2%), but the borough of Manhattan does (6.9%). Working at home isn't solely a small town or suburban thing.

Work-from-home percentages in the double digits are found almost exclusively in small towns and suburbs, though, and the other thing that stood out to me was how many of the places above that threshold are in California and especially Northern California. By my count about 8% of the US cities, towns and places with more than 1,000 workers and a work-at-home share of 10% or more from 2014 through 2018 are in or right on the edges of the San Jose-San Francisco-Oakland combined statistical area, aka the Bay Area, which is home to 3% of the nation's population.

These places include a lot of scenic enclaves nestled in the area's mountains or along the coast — mini versions of the resort towns in the first chart. But there's also the city of Berkeley (10.1%), plus a lot of affluent suburbs in Marin County and the East Bay, including the one where I grew up, Lafayette (11.5%). These are all an easy enough daily commute to San Francisco but not to the area's greatest source of wealth and high-end work in recent decades, Silicon Valley. In the meantime, while housing in these places is awfully expensive by national standards, it's cheaper than in Silicon Valley. And so (I conjecture, with some anecdotal backing) they are inhabited by growing numbers of people with jobs that require some proximity to Cupertino, Mountain View, Sand Hill Road or the like, but can be done most days from home.

Working from home in a Bay Area suburb or mountain enclave may of course lose in attractiveness if the gigantic wildfires of the past few years persist. But I don't think such arrangements are just a way station on the path to a new normal in which agglomeration effects no longer matter and knowledge industries cease to cluster in specific places because nobody ever goes to the office anyway. The advantages of frequent if not necessarily daily in-person contact with colleagues and peers, of living near multiple employers in your field, with career opportunities for both members of a two-income couple, not to mention all the cultural and other attractions of metropolitan life, will I think continue to weigh heavily in favor of large metropolitan areas. In fact, more people working from home may make such places more livable both for the remote workers who no longer have to commute every day and the commuters who still do.

Finally, I also looked up the work-at-home percentages for all the nation's counties for 2014-2018.

The darkest spots on the map are for the most part rural counties in the Great Plains with very few people, many of them farmers or ranchers. Petroleum County, Montana, population 487, is No. 1 with 36.2% of employed persons working at home, give or take 9.2 percentage points. Beyond that the work-at-home shares do seem to be higher in mountains and along some coasts, and lower in the Rust Belt, the South and a big swath of Arizona, California and Nevada. Maybe there are are important lessons for the future here. Or maybe it's just a pretty map.

1. In 2019 an estimated 56% of the US population lived in metropolitan areas of 1 million people or more, and 69% in metro areas of 500,000 or more.

Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of "The Myth of the Rational Market."

Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.