Mismatch between jobs and housing, will big cities build more or jobs migrate out? (middle-class, rent)
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There's a big mismatch between where jobs, or at least the HQ of jobs in the US, and where the available housing is. This thought experiment article from the Atlantic highlights how many houses would have to built in major metros to bring prices back in line with affordibility for the jobs offered.
In a blockbuster 2019 paper, they found that if New York, San Jose, and San Francisco—just those three cities—had the permitting standards of Atlanta or Chicago over the previous several decades, the U.S. economy would have been roughly $2 trillion bigger in 2009. American households would have earned an average of $3,685 more a year.
Quote:
San Francisco would have an employed population 510 percent bigger than it does today—implying an overall population of something like 4 million, rather than 815,000, with 2 million housing units instead of 400,000. The Bay Area as a whole would be five times its current size, the economists estimated.
And this is just housing. Even metros that have housing, like Atlanta, are so backed up on infrastructure that they effectively can't move an additional 1-2 million more people people from home to office. There's no path forward for better infrastructure there.
So, here's the question: will big job center metros actually ever building housing and infrastructure to bring workers towards the jobs, or will the jobs migrate out, through remote work, to where the available affordable housing is. This affordablility gap that is present won't continue now that remote work presents a viable alternative, people will live where they can afford based on their salary.
I'm optimistic that Seattle will do ok. Counties and cities are required to accommodate housing growth per State population/household projections, so there's room to grow. They don't upzone enough to make land affordable however (on a per-unit basis), so costs will likely stay high.
Cities are getting more aggressive in their planning, with several planning major plan/code updates in 2024, some potentially well above the mandates. Seattle itself is studying options for a baseline of 100,000 (or maybe 120,000) added units 2024-44 (which is actually below recent gains). Redmond could add 20,000 to grow by 2/3 in the same period. Bellevue might roughly double with another 70,000. Tacoma plans another 45,000.
If California's new regs open things in a similar way, maybe they'll play catch-up to their jobs imbalance. If not...
Jobs are already migrating out. Such trends are difficult to get rolling and even more difficult to stop once they get going. Many big job centers suffering from housing shortages don't want more housing. E.g. California is trying to force cities to permit more housing, but cities are fighting this at every step and finding creative ways to get around it.
Even if these places suddenly change direction, they are so far behind on housing that it'll take 10+ years to make a significant difference.
In the meantime, the US is likely looking at demographic decline for the foreseeable future. Job center metros will age even faster than the rest of the country, leading to shortages of workers and care for the elderly.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Yes, it started years ago here in the Seattle area, when Microsoft built their extensive Redmond campus for 53,000 employees in 1986, and Costco built their Issaquah headquarters for 4,000 in 1995, and now Google is completing four buildings will total 760,000 square feet of space in Kirkland. Even Amazon with their huge Seattle South Lake Union Campus is moving more jobs to the east in Bellevue. It's not just the housing, but the crime in Seattle, and better schools for those employees with kids.
My position is that mid-sized metros particularly in the south & mountain west are going to keep being the winners. The expensive coasts won't produce enough housing to satisfy their enormous demand. Just look at their own population projections for the future, they aren't even pretending to come close to that.
I know economists would like the most productive areas to add more housing, but I think the more likely answer is to build more large cities. It's the south's turn in the sun and I don't think it's going to stop anytime soon.
The sooner we stop pretending that this will be solved by the Northeast & California coast, the better it will be for everyone. My opinion is that we should subsidize new up and coming metros (like Boise) to make them even nicer places to live.
My position is that mid-sized metros particularly in the south & mountain west are going to keep being the winners. The expensive coasts won't produce enough housing to satisfy their enormous demand. Just look at their own population projections for the future, they aren't even pretending to come close to that.
I know economists would like the most productive areas to add more housing, but I think the more likely answer is to build more large cities. It's the south's turn in the sun and I don't think it's going to stop anytime soon.
The sooner we stop pretending that this will be solved by the Northeast & California coast, the better it will be for everyone. My opinion is that we should subsidize new up and coming metros (like Boise) to make them even nicer places to live.
There's plenty of available space in the interior north east which includes some really nice small towns that young professionals who want to remote work could potentially live in.
Yes, it started years ago here in the Seattle area, when Microsoft built their extensive Redmond campus for 53,000 employees in 1986, and Costco built their Issaquah headquarters for 4,000 in 1995, and now Google is completing four buildings will total 760,000 square feet of space in Kirkland. Even Amazon with their huge Seattle South Lake Union Campus is moving more jobs to the east in Bellevue. It's not just the housing, but the crime in Seattle, and better schools for those employees with kids.
The Eastside suburbs of Seattle are really nice. Clean, safe, and better access to the cascades than Seattle. I can definitely see the appeal.
According to Forbes, move out of the big city seems to be the preference of millenials and Gen Z.
Quote:
For many, it’s coming down to location as would-be homeowners look further afield to more suburban and rural areas. About seven in 10 Americans actually now disagree with the statement: “You have to live in the city in order to be successful in life,” Harris finds.
Gen Z and millennials may lead the charge away from buying in cities, Harris finds, as it turns out they’re more open to moving to the suburbs and rural areas than older generations.
There simply is no easing up of rising housing costs in big cities, rent in NYC is like $4500 or something now, and wages for the 50th-90th income percentiles have not risen like they have for the lower brackets. Preference or not, finances simply do not support sinking down into a major pricey metro. And most all major metros, even Dallas, are pricey now.
There simply is no easing up of rising housing costs in big cities, rent in NYC is like $4500 or something now, and wages for the 50th-90th income percentiles have not risen like they have for the lower brackets. Preference or not, finances simply do not support sinking down into a major pricey metro. And most all major metros, even Dallas, are pricey now.
It's all true.
The housing cost increases, particularly in large coastal or tech-heavy metros, were never sustainable.
The standard-of-living also continues to drop for middle-class earners in major metro areas, as purchasing power dips even further with inflation. What logical individual in that economic bracket wouldn't consider moving to say, Sacramento, from Fremont, if their job accommodates such a move? That's also why remote work is very likely here to stay and become more common--large companies HQ'd in expensive cities can no longer attract workers to anywhere near the same degree as they once did precisely due to COL.
The days of fast growth (we'll say, more than 1-2% annually) for major metro areas is very likely overwhelmingly over. There's just too much of an economic imbalance to predict otherwise, to say nothing of other demographic headwinds.
Last edited by Duderino; 12-09-2022 at 10:07 AM..
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