Residential location choices and commuting patterns considering telecommuting

Abstract

The COVID-19 pandemic has initiated more telecommuting (or working from home) than ever. This paper provides an economic analysis of the impacts of telecommuting on the residential location choice equilibrium. In particular, this paper employs a simplified monocentric city model of urban spatial structure to analytically examine the impacts of telecommuting on residential location choices and the associated commuting pattern in a city, considering that telecommuting may have positive, zero, or negative impact on individual income level. We found that the income effect of telecommuting and its relative magnitude against the commuting cost govern whether telecommuting will attract more to live in the suburb or the downtown. Moreover, the impacts of housing supply and commuting costs on the residential location choice equilibrium are dependent on the level of telecommuting, where such impacts diminish when the level of telecommuting increases. Furthermore, this paper derives and examines analytical solutions for the optimal level of telecommuting, the optimal housing supply and the optimal transport investment (that reduces commuting cost) in order to improve social welfare or the housing operator’s profit in the context of telecommuting. How these optimal solutions are related to the level of telecommuting is also analyzed. This study provides understanding on how telecommuting may affect the joint equilibrium of residential location choice and commuting and how housing supply and transport investment should be adjusted in response to telecommuting.