35Bloomberg Businessweek December 21, 2020
San JoseSanFranciscoHonoluluwhoaren’trealestateagentsorfield
operations staff—to
work remotely
full time as long as
theyaccept“localized”compensation.
ThepolicymakessenseforRedfin,
whichhas more to gainthan most
employersfroma wholesalelaborshift.
Thecompany,whichhasbeenaround
since2006,is a low-costrealestatebro-
keragethatalsomaintainsa popular
home-shopping app. It employs about
1,900 salaried agents in more than
90 markets in the U.S. and Canada and
offers listing fees that can amount to as
little as a third of the industry standard.
When the virus shut down the
economy this spring, investors wor-
ried Redfin would be saddled with big
losses. The company had expanded into
mortgage lending and had been buy-
ing homes for cash and flipping them—
business practices that had begun
to look dicey. Home sales plunged,
hurting agent fees. Redfin’s stock lost
two-thirds of its value from Feb. 21 to
March 18, falling to $10.33 a share. By
early April, Kelman had decided to
forgo the remainder of his $300,000
base salary for the year and temporar-
ily cut the pay by 10% for all headquar-
ters staff who made more than $80,000
a year. He furloughed or let
go two-fifths of the agents
and their support staff.
Then, almost as quickly as things
had fallen apart, they came roaring
back. Low mortgage rates and new-
found work flexibility gave people a
reason to buy homes in places they
would never have considered before.
In August the National Association of
Realtors reported that the area around
Kingston, N.Y., a working-class town
about two hours north of Manhattan,
had the fastest-appreciating home
prices in the U.S. Throughout the West,
communities near national parks and
ski resorts were becoming “Zoom
towns” for remote workers, dramati-
cally pushing up home prices.
Millennials, who’d spent a decade
horrifying their parents by pay-
ing $3,000 a month to occupy
tiny, roach-ridden warrens near
farm-to-tablerestaurantsinbigcities,
hadalreadystartedseekingoutfarm-
to-tablerestaurantsinthesuburbs.The
pandemicacceleratedthattrend,too.
Redfintookadvantageofallthis,
allowinghomebuyersto videochat
withagentsortotakevirtual-reality
toursonitswebsite.Revenueended
thesecondquarterat$214million,up
8%froma yearearlier.Thecompany
reinstatedsalariesforheadquarters
staffinJuneandbythenextmonthhad
broughtbacktheagentsit furloughed.
InSeptember thestock climbedto
morethan$50a share.
Inside the company, though,
employees had been demanding
answers. “We had people asking,
‘Well, when are we going to come
back?’ ” Kelman recalls. “Some of them
wanted to know if they could move to
Montana.” The head of product design,
Colin Grigson, 38, had been spending
part of his time in an Airstream on land
he owned outside Walla Walla, Wash.
There was no running water, but he
was logging on to video calls through a
Verizon hotspot and using solar panels
to power his computer. “I’d be in these
meetings, and they’re like, ‘How is this
working?’ ” Grigson says.
More common, though, were
questions about regional moves. An
employee wanted to leave Seattle’s
Queen Anne neighborhood for Mill
Creek, Wash., about 25 miles north.
How often would she have to come into
Redfin’s headquarters? Even Kelman’s
executive assistant was thinking about
moving to a far-flung suburb.
In June, Redfin told employees they
wouldn’t be required to come back to
the office for the rest of the year, and
Kelman started working with his exec-
utive team on a longer-term plan. Many
companies and large organizations,
including the federal government, pay
differently in different places, because
the costs of living and labor can vary
widely. Redfin had been no exception,
and it already had a process for chang-
ing pay for agents when they moved
between markets. But, until that point,
relocations and salary adjustments for
headquarters staff had been handledon a case-by-case basis.
Over the summer, Redfin’s
human resources team began sur-
veying employees and researching
how businesses such as Facebook,
Uber, Amazon, and Mastercard were
approaching the challenge. Even in nor-
mal times, getting the numbers right is
tricky. Pay too little, and a business
will struggle to recruit. Pay too much,
and profits suffer. So companies con-
stantly keep tabs on the cost of labor
in markets where they operate. Before
the pandemic, Redfin considered rais-
ing engineer salaries every six months
to stay competitive with the big tech
companies. Remote work introduced
a whole new set of challenges, Kelman
says. It was like “opening an office in
every American city” all at once.
Suzanne Sanders, director of com-
pensation, started her analysis by get-
ting data on roughly 7,500 cities from
the Economic Research Institute, which
compiles information on wages and
the cost of living across the U.S. She
grouped the data by the state and metro
area and focused on professionals who
made around $100,000 a year, roughly
the midpoint for Redfin’s Seattle head-
quarters staff. She also included varia-
tions for different kinds of jobs, such
as software engineer and product man-
ager, creating an “insane spreadsheet.”
By late August, Redfin executives
had settled on an approach that divided
metro areas into tiers based on cost.
There were still lots of judgment calls
to be made. Should Portland, Ore.,
where the median home sold for about
$450,000, be lumped in with Seattle,
where it fetched $640,000? Was it right
to separate the huge sprawl east of Los
AngelesCounty,whichispartofthe
Riversidemetroarea,fromLosAngeles
itself ?Peoplesometimes commute
betweenthetwo,butthecostofliving
is about 25% lower in Riverside.
Then there was Bend, Ore., a sun-
soaked city on the eastern side of the
Cascades that’s popular with outdoorsy
types and thus a bit more expensive
than comparable locations. On Aug. 24
the executives went back and forth
during their weekly Google Hangout,