Return-to-office orders may strain feds over housing cost, report says

Decreasing telework opportunities may prompt federal employees to leave the government workforce, not just because they’re losing a competitive benefit, but because housing affordability in the region remains a deep concern for those who are being called back to metro offices.

A joint study by the National Capital Planning Commission and the Metropolitan Washington Council of Governments broke down how limited telework would require the government to hold onto its expiring leases, thereby creating demand for housing in a region with high post-pandemic rent and home prices.

“With regular commuting becoming a necessity again, proximity to federal workplaces would likely become a prime consideration,” according to the findings. “Since the beginning of the pandemic, average rent in the D.C. region rose by 12% to $2,000, while average home prices have grown by 22% to $533,000, a trend seen throughout the nation.”

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For marginalized communities, those increases are more dramatic; the report indicates there’s a $156,000 gap in median home value between Black and white residents.

Sustained high prices and limited inventory may pose an issue for workers who moved out from cities to lower cost areas during the pandemic and are being called back.

“Property values in areas proximate to federal offices might experience an uptick due to sustained competition over a limited amount of housing,” the report added, also acknowledging that retail and service sectors that depend on the business of federal employees could see profound economic implications under a limited telework policy.

Minimum vs. Maximum telework

At this point, the federal government has for the most part settled into a hybrid work schedule with agencies determining for themselves what cadence works best. Some agencies continue to permit remote work more than others, while the White House, local D.C. leadership and conservative lawmakers have sought to more aggressively call workers back. A change in administration prompted by the general election in November could see telework further eroded at the hands of a Republican administration. Even so, President Joe Biden’s chief of staff has prodded agency leaders over their reentry plans.

If that trend continues, minimum telework may cause the federal government to maintain its federal real estate as it did prior to the pandemic, the report said. That’s as the General Services Administration is trying to consolidate space it no longer needs or that cannot be affordably renovated in order to save costs and devote resources to critical repair projects.

One possible solution would be to rely less on leased space and more on owning facilities, which long term would get rid of recurring costs associated with leasing, the report said.

Still, a minimum-telework scenario is just one of several that could play out.

If maximum telework is safeguarded instead of minimized, some agencies’ office utilization may fall as low as 9%, according to the report’s estimates.

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Some agencies may see a larger in-person presence if they deal with national security information or operate labs, and that means space use would vary around the DMV. For example, Alexandria, Virginia, has a lower concentration of these types of federal offices; therefore, the area could see a much more dramatic decrease in office space compared to Arlington, which houses the Pentagon, for example.

And any contractions of space could lead to a dispersion of workers to other cities and rural areas who bring retail business and transit infrastructure with them, the report said. On the flip side, existing public transit in metro areas would see dramatically decreased weekday ridership under heightened telework.

While it’s still unclear how telework decisions will be finalized, nearly a third of all federally leased space in D.C. is expiring within five years. For some areas, including Prince Georges County, Maryland, and the City of Alexandria, Virginia, those rates are 46% and 94% respectively.