The pandemic has redefined how many Americans work, forced more of us to find refuge in our homes, and called into question the necessity of those dreaded commutes to a downtown office.
We are seeing these issues play out in real estate markets. Single-family home prices are on the rise — increasing seven percent during the past calendar year. Meanwhile, commercial real estate demand has remained relatively flat — perhaps a surprise given the massive shift to working from home.
But underneath these aggregate trends lie a substantial reallocation of demand away from city centers toward city suburbs for the largest metro areas in the U.S.
This creates what we call the “donut effect”: rising prices in the suburbs and slumping prices in major city centers being hollowed out by a fear of crowds and the growth of working from home.
This policy brief explains what is causing this donut effect and lays out the policy concerns it poses.