The amount of rent paid per employee has been driven down over the decades as the square foot space dedicated per employee has driven down. Give employees those savings and it would amount to converting an already used space (a closet) in your home to some pale representation of what you had in the office. Certainly would not justify adding on to the employee’s house, and not everyone has spare space they bought or rent that they magically don’t need for personal use anymore.
Rent per square foot in the city center where my company's office is located is at least ten times rent per square foot on a house like mine in the suburb I live in. The rent per square foot for a desk in a serviced office near where I live is about halfway between the two.
In fact the rent on a small three bedroom house in my neighbourhood and the rent per employee for office space where I work are comparable.
I think you would be surprised to what the ratio of office square foot to employee headcount looks like. Most modern offices are designed to 150-250 sf per employee including circulating space, common meeting rooms, kitchens, and washrooms.
Also, if what you say is correct, that office space is 10x suburban housing rent, that is most certainly an anomaly unique to your city. That would mean a high end market, like NY or SF with $100-$150 per square foot rents would have housing stock renting for $10-15 per square foot (these are annual numbers). That is not the case in any market I have ever encountered.
My city is unusual, fair. But 5x ratio would be far from unusual. One could easily find an apartment in Staten Island (not even a suburb, not very far from the city center) for less than 1/5 Manhattan office rent per sq ft.
I'm not sure of your point about sq ft per employee. 10 times 150 sq ft seems like quite a nice three bed.
5 times the office space per employee is going to be huge, especially given that most people already have kitchens and bathrooms.