Rising rents are pushing Americans out of cities. Why it’s causing the ‘donut effect’

Big cities in America have undergone seismic shifts in recent years, largely influenced by the shift to remote work that accelerated during the COVID-19 pandemic. As white-collar workers transitioned to remote and hybrid work models, many businesses found they were no longer tied to the physical office. Workers scattered beyond cities, triggering significant changes in the housing market.

The migration pattern was dubbed “the donut effect” by Stanford University economist Nicholas Bloom and Arjun Ramani, now a grad student at MIT. In a 2021 paper, they observed that the centers (or holes) of major cities in America saw big population decreases, while the surrounding areas of those places (the donuts) saw population gains. Urbanites, free from their daily commutes, sought more spacious and affordable housing outside of dense center centers, shifting supply and demand in the housing market.