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Are City Residents Saying Goodbye to Urban Living?

Thanks to more hybrid and remote work, some people are moving out of New York and San Francisco, but so far, there has been no exodus to Oklahoma City or Peoria, no revival of rural America or the Rust Belt.

Aerial view of lower Manhattan. A stream of residents are packing their bags and leaving, but aren't going far.
Melea Weber and her husband loved living in Brooklyn. As 2020 began, they’d been there for a decade and had even begun a family.

But the future loomed uncertain, even before the COVID-19 pandemic paralyzed their city. They wanted to have another child but could not afford a three-bedroom apartment in New York. The neighborhood where they lived had become increasingly expensive and their rent ate up a disconcerting amount of income.

“Like a lot of people, we had been flirting with leaving the city pre-pandemic,” says Weber, who works at a social services nonprofit. Her husband works as a marketing administrator at a music school in Manhattan. Last summer, they moved to Morris County, N. J., over an hour outside the city by train or car.

“The pandemic was the impetus,” says Weber. “Largely, it was because of the flexibility of my husband going remote. We could just get a lot more house outside the city.”

The pandemic changed a lot about American life. But hopes that it would break up the agglomeration economies of the nation’s superstar cities, like New York, have not been borne out. So far there has been no exodus to Oklahoma City or Peoria, no revival of rural America or the Rust Belt.

That’s not to say people haven’t been moving. But like Weber, most simply shifted from central cities to the suburbs. A new paper released this week by the National Bureau of Economic Research calls this “the donut effect,” and it's been especially true of the largest cities. Mid-sized metropolitan areas have been less affected, while the smallest cities experienced no discernible change at all.

“We observe a lot more activity moving from the city centers to corresponding suburbs, as opposed to between different cities,” says Arjun Ramani, an economist at Stanford University. “That is the dominant form of movement that's happening right now.”

Ramani’s paper with Nicholas Bloom, also of Stanford University, studies both real estate rents and prices (using data from Zillow) and population trends (using change-of-address data from the postal service). They find that large cities have lost out to their suburbs in some cases, but in every case the dense urban core – central business districts like Manhattan – were hammered the hardest. They define large cities as the 12 most populous metropolitan areas: New York, Los Angeles, Chicago, Dallas, Houston, Miami, Philadelphia, Washington D.C., Atlanta, Boston, San Francisco and Phoenix.

They find that on average 15 percent of residential population and business establishments moved out of the centers of these large cities over the last year. Their suburbs meanwhile have seen an almost 15 percent price growth divergence from city centers during the same period.

Ramani and Bloom explain the lack of a regional population shift to the presumed prevalence of hybrid working after the pandemic, where office workers are only expected to come in a few days per week. In most jobs that were fully remote during the pandemic, workers will be expected to regularly show up in person soon, if they haven’t already. That means they can’t leave the region where their job is based, but it also means they can move further away from the office. A longer commute for cheaper housing is more tolerable if it is only a few days a week.

The largest cities are seeing these effects most substantially because they are the most expensive and have the most residents like Weber and her husband. Cities like New York, Boston and Los Angeles have a lot of two-income households that still face housing burdens, and where both wage earners’ work can be done from home.

“We actually were doing better financially during the pandemic,” says Weber. “Cost was an issue [that prompted their move], but not because we lost jobs or had pay cuts. We just want more kids, need a bigger apartment and there is probably no feasible way that we are going to be able to afford a three-bedroom apartment in New York City.”

Weber’s story is a common one in the so-called superstar cities like New York and San Francisco, which have hoovered up so much of the nation’s wealth and jobs in recent years. But while the broad trend holds across these 12 large cities, it is less true in sprawling urban centers like Houston or in cheaper locations like Philadelphia. In these and similar areas, many urban neighborhoods were more affordable than their suburban counterparts before the pandemic. Similarly, many job centers were already outside the urban core.

“We pulled all the largest cities together because we wanted to give a general picture,” says Ramani. “But in Philadelphia you're seeing a much smaller divergence between the city center and the suburbs. You see the largest effects in New York and San Francisco, while in Philly there’s not nearly the same level of donut effect.”

It’s also unclear whether we’ve seen the end of pandemic-related residential movement. After all, many people may have decided to stay close to their company’s home office during the pandemic because they don’t yet know if they will be called back to work. But some percentage of workers will be remote forever. After that becomes clear, in theory, they could move wherever they please.

“Workers are waiting to see whether it's truly permanent, and their businesses are waiting to decide how permanent to make it,” says Adam Ozimek, chief economist at Upwork. “It's easier for people to make the decision to move to a nearby suburb than to make the decision to move somewhere else. It means it's going to take workers a little bit longer to make that leap.”

Ramani believes it's unlikely that a substantial number of people will be fully working from home in a year’s time. Too many business owners will decide that there is a high enough premium on in-person collaboration, he argues. Younger or newer workers will be easier to incorporate into a company in person.

But this pivot to hybrid work, and the radical changes it could bring to commuting, could nonetheless have dramatic consequences that policymakers will have to grapple with.

Ramani and Bloom predict that their findings “may lead to persistent reductions in tax revenues for major cities.” Another NBER paper from April (also co-authored by Bloom), argued that 20 percent of full workdays will be “supplied” from home in future, compared to 5 percent before. “The shift to [work-from-home] will directly reduce spending in major city centers by at least 5 to 10 percent relative to pre-pandemic," that paper predicts.

There will be ramifications too for transit, congestion, parking and auto fatalities. Commuter railways are facing an uncertain future, and inner-city systems are still at less than half of pre-pandemic ridership. Meanwhile traffic deaths have skyrocketed in the past year, even when large swathes of the economy were frozen.

For Weber’s family, renting a home over an hour outside Manhattan, the future is uncertain. Her job was fully remote before the pandemic, but her husband expects to return to work full time by the fall. He’s already planning to take the NJ Transit commuter line, figuring it will be easier than driving because he can walk to the station from their house. What could be a 90-minute commute both ways is daunting and they may move again to try and get him closer to the island.

But Weber says she doesn’t think they will ever move back to the city, much as they might like to.

“We love New York, so this is bittersweet,” says Weber. “We miss the city. We miss the people, the energy. But we would need to find jobs that pay significantly more to move back. Or if it became a more affordable city, we would love to return.”
Jake Blumgart is a senior writer for Governing and covers transportation and infrastructure. He lives in Philadelphia. Follow him on Twitter at @jblumgart.
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