WORK FROM HOME WILL BURST URBAN BUBBLES. MINTZ,

Opentext, one of Canada’s premier high- tech companies, drew attention last week when it announced that it plans to close half of its offices worldwide, as about 2,000 of its employees switch to working from home on a permanent basis. Opentext is not alone. Morgan Stanley, Twitter, Facebook and Google have all indicated they will shift towards work- at- home models for many of their employees. It is not that we have all of sudden discovered people can work from home through digitization and telecommunication. It’s just that this pandemic has taught many employers the switch can be successful.

A PWC survey found that 26 per cent of U. S. companies are now looking to reduce their real estate requirements in 2020. If a major shift leads to working at home on a partial or fulltime basis, it will also have a significant impact on municipal planning and budgets.

Let’s be realistic, though. Not all work can be done at home. Video conferencing is not perfect, especially for large groups. Face- to- face all- day meetings still have more spontaneity and conversational ease. Besides, many people like going to a workplace either because they lack privacy at home, have toddlers running around them or are more productive somewhere other than home.

Some industries also need to have their employees at the workplace. Most goods-producing businesses, as well as service companies ranging from restaurants to health clinics that require face- to- face customer contact, still need their people all in one place.

That said, there are significant benefits from not travelling to work. People living in suburbs far from their downtown workplace can save from one to three hours of daily commuting time that can be better used either for work or leisure. Every day they don’t travel also means less spending for gas or electricity, parking, depreciation on a car or transit fares, as well as less risk of traffic accidents and lower insurance costs.

Workers also avoid flus and viruses by not crowding into buses, trains or offices. Traffic congestion declines, allowing those who wish to travel do so more freely by personal automobile. Meanwhile, employers have more room to safely space out those workers who do come to the workplace.

Most important of all perhaps, as Opentext mentions, businesses need not move families to cities where their offices are located. That gives them more flexibility in hiring from afar the most talented workers, which is especially important in a world of two- worker families. Moreover, workers can move away from dense cities with high rents and housing prices to communities with detached homes and green space, a dream many millennials have today.

Besides, today’s tech companies like Apple and Google will soon figure out how to make communication technology even better so people can work at home more seamlessly.

So, what does this mean in economic terms? The simplest urban economics model teaches that land rents are highest at the city core where most people work. Those who dislike commuting because of its time and monetary costs will pay more for housing near the core. Others who face lower commuting costs or prefer better housing move away from the city core to where land rents are lower. Think of it as a “land rent bubble” that rises from the outer perimeter of the city to reach its highest level at the city core.

Digital technologies uproot much of this simple characterization of an urban economy. If people can work from home, they may prefer to live farther from the city core where housing is cheaper. Rents at the core decline relative to the those in the periphery. In effect, communication technologies flatten the land rent bubble.

As a result, cities will find it harder to pursue urban planning based on densification strategies that crowd people into large, highrise apartment buildings or smaller homes. Why? People who dislike that type of lifestyle will no longer be bound to downtown by work.

Municipal governments in bedroom communities should look at creating their own community amenities as workers travel less to the city core. For example, when I was in The Woodlands, Texas, recently, I was struck by how pleasant a town it is, with its own entertainment and shopping areas but still within easy access of a Texas Rangers’ game in metropolitan Houston.

Falling land prices at the city core also mean demand will slow or even contract for commercial real estate — though that will be balanced by increased demand for shopping and ancillary services at the periphery. Commercial real estate companies heavily invested in downtown office towers may find future returns on their investments more challenging.

Cities likely will find that property taxes, their most important source of revenue, will be flattened, as well. Large urban centres typically impose their highest property tax rates on businesses. For instance, Calgary’s tax rates on non- residential property are 250 per cent higher than its residential rates, even after recent business property tax reductions. The loss of property tax at Calgary’s core has put the municipal budget in jeopardy. The city must now either raise residential property tax rates or fees or slim the government — or do both.

No one can be sure how much this pandemic will end up affecting work patterns. But municipal politicians should start thinking about what some of the outcomes might be.