Facebook used to do basically that - they gave you a $1000/month stipend if you lived within 5 miles of the office. A lot of other companies do it in more informal ways too, eg. I've heard of companies turning down applicants because they lived an hour and a half commute away from the office.

It has some mixed results. It's very positive for traffic and for climate change - if everyone goes from a 30 mile commute to a 5 mile one, that's 6x fewer vehicle miles traveled, 6x less car CO2 emissions, and 6x less traffic. But it also drives up rents around the office to crazy-high levels. Facebook's policy basically just boosted rents in Palo Alto by $1000/month (when they were there), and then it and the office location was single-handedly responsible for the gentrification of East Palo Alto (after they moved).

This makes sense multiple perspectives: it's good for the climate to not make people burn gasoline every day (though this point may be lost on some people) and it's also good for the local community - both the employer needs to step his game up to assist and train people more since talent pool is limited and locals also need to step their game up since there are only so many local employers around (assuming all prefer to hire locally).

Going this way, if this were a law, would also prevent employers from treating people as expendable. Flying people in from across the globe because they are marginally cheaper than the local work force never made sense to me.

That's already been the case all along

Is that so bad? The other way of looking at it is that employers would be more likely to allow WFH, since they don't have to pay for your commute costs anymore