The Big-City Exodus Isn’t Very Big (Yet)

Coronavirus bringing ‘the end’ of New York city doesn’t line well with the statistics, yet.
The Big-City Exodus Isn’t Very Big (Yet)
Pedestrians wearing protective masks walk through the Chinatown neighborhood of New York, U.S. (Photographer: Nina Westervelt/Bloomberg)

You may have heard that people are leaving big cities, particularly New York City. And why wouldn’t they? New York was brutalized by Covid-19 in the spring, and now confronts a 19.8% unemployment rate, huge budget shortfalls and a sharp rise in shootings. Other cities haven’t been quite so battered by the coronavirus, but face big challenges if pandemic-induced work-from-home arrangements engender a permanent shift of white-collar workers away from downtown offices.

What’s more, the global “superstar city” phenomenon was already showing signs of peaking before the pandemic, with New York, Los Angeles, London, Paris, Amsterdam, Sydney, Toronto and others seeing increasing outflows of residents to other domestic locales in recent years. New York, after adding more than a million residents over the previous 25 years, has by the Census Bureau’s reckoning been losing population outright since 2016.

Still, talk of a new urban exodus risks getting ahead of itself. Pulling up stakes is not something people in the U.S. do lightly, at least not any more. Just 3.6% of Americans moved to a different county from 2018 to 2019, according to Census Bureau surveys conducted mostly in March of each year, down from 6.4% as recently as 2000. Only 1.5% moved to a different state.

The Big-City Exodus Isn’t Very Big (Yet)

The Census Bureau also estimates that 132,266 more people left New York City for elsewhere in the country from July 1, 2018, through July 1, 2019, than arrived there from elsewhere in the country, which adds up to 1.6% percent of the city’s 2018 population of 8.4 million. Internal Revenue Service tax data from a year earlier indicate that more than 60% of net departures were to the city’s suburbs and exurbs.

The Big-City Exodus Isn’t Very Big (Yet)

How much more movement will there be this year? A Pew Research Center survey in early June found that 3% of those polled in the U.S. had moved temporarily or permanently because of Covid-19. It is hard to interpret what exactly that will mean for increased residential mobility for the year as a whole, but seems like an indication that the rise will be noticeable but not spectacular. It will clearly be higher in some places, especially New York City. United Van Lines reports a doubling of the number of people looking to move out of the city, and real estate appraiser Jonathan J. Miller estimates that transaction volumes in New York suburbs were up 51% in July over the year before.

Together with big transaction-volume declines in Manhattan, this leads Miller to a back-of-the-envelope estimate that about 40,000 to 50,000 more New Yorkers than usual will leave for the suburbs this year. A lot of them appear to be members of young, affluent(ish) families who had been living in rental apartments. Such people were prime candidates for leaving the city already, with the experience of being stuck in cramped urban surroundings with small children during a pandemic accelerating the decision. “What we’re getting now is 3 to 5 years of outflow all at once,” Miller says. That could mean fewer moves to the suburbs in coming years as demand is sated, or it could mean more moves as friends follow friends out of the city. Miller says suburban transaction volume is already showing signs of peaking, and that an inordinately high share of the purchase contracts (about a third) are blowing up as buyers back out, both of which seem to indicate that things have gotten a bit ahead of themselves. But, as I’ll discuss later, a lot depends on how quickly the city otherwise recovers from the shock it has been dealt.

Miller’s 40,000-50,000 estimate leaves out those who already owned vacation houses outside the city that they’ve occupied full-time since March, but such people are fewer in number than their prominence in the news media indicates. Also not included are those departing for farther afield than the city’s suburbs, but they too may be less numerous than you might think, as the rise in work-from-anywhere jobs is probably at least partly canceled out by the decline in jobs, period, and job opportunities are a key driver of metropolitan-area-to-metropolitan-area moves. Online real estate brokerage Redfin’s measure of net outbound home searches by metropolitan area shows that those from the New York area actually fell from the second quarter of 2019 to the second quarter of 2020.

Another form of urban (and college-town) flight has involved students and young workers moving back in with their parents after the pandemic struck. Nationwide there are 2.7 million such individuals, University of Maryland sociologist Philip N. Cohen has estimated on the basis of data from the Current Population Survey (which the Census Bureau conducts every month for the Bureau of Labor Statistics) that shows 48.7% of 18- to 29-year-olds living with parents or grandparents in July, up from 43% in February. Many of the young people who fled New York in this way will be back eventually, but in the meantime that leaves a lot of vacant apartments.

All in all, I can easily see how net domestic migration from New York might top 200,000 from mid-2019 through mid-2020, a big increase from 2018-2019’s 132,266. Who knows, maybe it could even top 300,000, but I still don’t think that counts as a full-on exodus. And departures from other cities seem to be on a much smaller scale than New York’s. A recent analysis by economists at real estate site Zillow found little evidence outside of the New York and San Francisco metropolitan areas of a sudden shift in demand away from cities and toward suburbs.

What matters for the long-term health of cities in general and New York City in particular, though, is what happens next. The great pandemic-induced experiment in working from home seems certain to result in lasting changes in how (and how often) knowledge workers use their offices, but they won’t completely go away. White-collar employers also won’t necessarily abandon cities, to which they had been returning from suburban office parks in recent decades in large part because cities were where educated young people wanted to be — and will likely want to be once again when indoor dining, nightlife and other attractions return. And though a big factor pushing people out of (and keeping young new arrivals away from) New York, San Francisco and other superstar cities in recent years has been high housing costs, those costs are coming down, with the median asking rent for a one-bedroom apartment now 14.1% lower than a year ago in San Francisco and 10.9% lower in New York, according to apartment site Zumper.

Then again, if this summer’s wave of violence in New York City turns out to be more than a temporary reaction to a very stressful situation, and if the city’s and Metropolitan Transit Authority’s financial troubles lead to sharp cuts in services, the quality of life that those rents purchase may fall faster than the rents do. Comparisons to the city’s precipitous 1970s decline seem wildly overdone at this stage, but without adept civic and political leadership over the next few years (New Yorkers will elect a new mayor next year) things could get pretty ugly.

There’s also the complication that the supply of Americans in their early to mid-20s is on the wane. That’s who comes to cities. Most members of the giant millennial generation are now in their 30s, an age when people tend to contemplate leaving them.

The Big-City Exodus Isn’t Very Big (Yet)

This belatedly brings me to perhaps the most important factor in the revival of cities in the U.S. and across the developed world over the past quarter-century-plus: immigrants. Even during its years of most-rapid population growth in the 1990s and earlier this decade, New York City was still losing more people to the rest of the metropolitan area and country than it was gaining in new domestic migrants, with births and immigrants accounting for all of the growth. Now birth rates are down, and the immigrant inflow has slowed. Illegal immigration to the U.S. has been more or less at a standstill since the last recession, and President Donald Trump has been narrowing pathways to legal immigration since 2017 and has used the occasion of the pandemic to narrow them further. A true urban revival is probably going to require an immigration revival.

A hat tip to Felix Salmon of Axios, who initially asked Miller on Twitter to come up with a number.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”

©2020 Bloomberg L.P.

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