There was some population growth in the 1990s in the other boroughs, but that dissipated by the 2000s. Generally, the very long term lack of any population growth in New York City and very little in San Francisco suggests that this problem will not be solved by expanding housing in those cities. Generations have governed under these policies.
Los Angeles may be approaching the growth level of the other problem cities, but, at least in absolute numbers, it has continued to accommodate growth. It is not as pure an example of the problem as Silicon Valley and New York City. It does have very high rents and home prices, but, it doesn't have particularly high incomes. It's at about $61,000, similar to Dallas and lower than the other high cost cities. It could be that housing constraints have been high enough to push rents above the comfortable level we see in unconstrained cities, but not so far as to lead to the sharp population shifts and limited access rents to wage-earners. Or the main factors could be differences in their population from other sources, with LA taking in immigrants from Mexico while Silicon Valley is more tied to the tech. industry and innovations drawing from Stanford and Cal Berkeley.
Here is a graph of net domestic migration from 2000 to 2007, for selected metro areas, by core and outlying counties. We can see the general trend toward the suburbs across cities. At first glance, this looks promising for New York, but such a small portion of the metro area's population is outside the core counties, its outlying growth is not significant.
Boston also shows up here with a pattern of domestic out-migration, and I find generally that Boston follows the same pattern as Silicon Valley and New York City, but on a smaller scale and with somewhat less of an affordability problem.
That graph measured net domestic migration from 2000 to 2007. The next graph is only for the period from 2000 to 2003. This is a short period, but the rates of migration for the cities included in these Census reports correlate highly with the 2000-2007 numbers, and for this period the Census bureau has a report that covers net domestic migration for the top 20 metro areas.
Even there, I think there are distortions that cause a distortion in these graphs. Among the cities with less population growth than average, there are two groups - new economy cities with housing constraints, which can be identified by their high housing costs, and old economy cities without housing constraints, which do not have particularly high housing costs. The old economy cities still tend to have high incomes, though. The classical description of what is going on here would be that populations flow to where incomes are higher. Why aren't they flowing to these rust belt cities, then?
These cities represent the previous generation of new-economy centers. Housing wasn't particularly common as a limit to broad job market access. But, in those cities, there were excess profits created by geographic advantages, the legacy of large capital expenses, and the sort of path dependent competitive advantages that accumulate as competition removes less competitive firms. In those areas, instead of housing, tactics like unionization, higher minimum wages, and local regulatory and tax burdens limited access by outside labor and extracted some of the excess profits of the geographically captured firms for broad local benefits and political nest feathering.
Few are moving to the old-economy cities because of high income employment opportunities, and they don't feel like high income cities. I think the high average incomes there are probably high mostly due to compositional effects. Whereas high income workers are moving into places like New York City, it is low income workers who are moving out of the old-economy cities because of lack of opportunities. Competitive frictions mean that some of the legacy industry still remains, and still provides some excess income to those who are fortunate enough to still be accruing the economic rents that have driven so many others out of town.
I think this is a danger for the new-economy cities. Will they be the Detroits of 2075? Can Seoul or Hong Kong end up capturing the cutting edge of the technological niches of the future? The high costs of Silicon Valley may cause that to happen sooner rather than later. And, as we see in the old-economy cities, the unraveling of an economy whose members have taken rents as a birthright is not particularly pleasant. Some of the geographical advantages that originally gave Detroit a competitive edge for automaking certainly remain. But, they are just not as large as they used to be. The problem is that rents are sticky, but competitive advantage is not. The housing problems in Silicon Valley and New York City are having a negative effect on all of us now, but those cities could eventually see consequences much worse than a costly housing market - rot and decline.
The way those graphs should look is that the regression line should be flat or upward sloping. This is clearly the case in aspirational countries like China. In China there are massive inflows into the cities, where incomes are much higher. As the housing stock strains to keep up with the inflow, costs rise. Eventually, costs equilibrate with incomes. The less friction there is in the ability to expand housing, the less incomes and costs in the city will tend to rise - population rises instead.
The difference between housing constrained cities and growing cities that aren't housing constrained is stark. In housing constrained cities, locals complain of poor people getting pushed out of their neighborhoods and rich people ruining the character of the city. In non-housing constrained growing cities, locals complain of poor immigrants and minorities moving in and ruining the character of the city. In housing constrained cities, the locals try to block outsiders from housing, and in non-housing constrained cities they try to block outsiders from the job market.
I will have more on this topic in the posts following this one. Outside these problem cities, the US matches the classical expectation.
Nice post. I think you are largely right about legacy populations leaving Los Angeles. I grew up in Los Angeles and I can tell you that many in my cohort have left as it is too expensive (housing) to live there.
ReplyDeleteOC should have become a rival and equal of LA or Silicon Valley. But it is so anti-development and has basically zoned everything single-family detached that it is expensive without a sexy industry.
LA is open to high-rise downtown. Just not a kid-friendly place.
LA is interesting. I haven't quite wrapped my head around it. Rent affordability and home prices are very high. But average incomes are very low. It could be something that would be clear if I could disaggregate it into more localized data. A big part of it is immigration. The Wikipedia page I linked to says more households speak Spanish in the LA MSA than English. Silicon Valley, on the other hand, is very white and Asian. Maybe there are two worlds in LA. A white world with average incomes of $80,000 and a Hispanic world with average incomes of $35,000. I'm not sure I'll be able to get at it. There is a similar thing going on in NY, but you can kind of tease it out by looking at Manhattan vs. the rest of the city. But, LA isn't subdivided so cleanly. As you have pointed out, the most exclusive places to live aren't necessarily the most dense parts of town. Sometimes, I focus only on SF & NY just because I don't have data on LA that is easy to narrate.
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