The Urban Exodus Continues
For the last several years, there has been a steady outflow of wealth from major US cities. Businesses and wealthy individuals are abandoning their urban homes and relocating to smaller and more wealth-friendly places. According to one source I read, 80% of the employment growth in 2021 was in suburban, not urban, areas.
There are several reasons for this. The first and most important one is economic. It is much, much more expensive to live and work in New York, Chicago, or LA than Austin, Asheville, or Fort Lauderdale. Housing (owned or rented) is about 30% less expensive. Consumables (food, energy, etc.) are 10% to 20% less expensive. And taxes are a huge factor. By moving to Florida, for example, a business or individual from NYC will avoid both state and city income tax, plus higher taxes on everything from real estate to purchases of goods and services.
Traditionally, the response to complaints about higher costs in big cities has been to point out that they offer personal amenities (culture) and business advantages (a high-caliber employee pool) that you can’t get elsewhere. But the government-enforced COVID shutdowns changed all that. For nearly two years, tens of millions of Americans worked remotely. And in doing so, many of them – business owners as well as highly skilled employees – realized that being in the middle of a big city was no longer an absolute necessity. Businesses could grow and individual employees could contribute to that growth by working remotely. Since the beginning of this year, there has been movement back to the office, but all the surveys I’ve seen suggest that the return, as a whole, will be about 20% to 30%.
The third reason is crime. Violent crime in all of the major US cities has been climbing steadily since 2019, with a sharp upward turn during the BLM riots. The worst of the violence, the murder rate, has increased by 50%. But this is not a likely cause of urban flight, because the great majority of it is Black-on-Black and Brown-on-Brown (80% and 15% respectively, according to the FBI), which occurs in and affects the populations of Black and Brown neighborhoods.
Other violent crimes, such as looting, mugging, and assault, have risen along with murder rates. But much of it takes place in business areas. (Mugging, for our employees in Baltimore, is a disturbingly common occurrence.) And it affects the employees and CEOs of both large and small businesses.
When businesses and people begin to move away from cities, it is a bad thing. It means less energy. Less activity. And more shuttered storefronts. But when big businesses and wealthy people leave, it is even worse. It means that the city’s primary source of income (tax revenues) goes down. And that means fewer services, more boarded-up houses and stores, and higher crime.
This year, there has been some migration back to the cities. And that could be a good thing. But it has been almost entirely middle- and working-class individuals. The businesses that have left are not likely to come back.
And yet, so far, the mayors of these cities don’t seem to get it. They count on their inner-city residents, many of whom are on the benefit side of the economy, to keep them in power. But they don’t see that as revenues shrink, they will not be able to provide even minimum services. Will NYC, LA, and Chicago turn into Caracas, Mumbai, and Kingston?
Click here.
And click here for a story about the latest loss for Chicago.
