Expensive Cities Aren't Attractive Cities: I swear, the last post

I ran the numbers.

When cities don’t build adequate housing, deeply regressive migration patterns arise. The Closed Access cities all have perennial negative net domestic migration, and it is basically all from the bottom income quintiles.

Again, looking at incomes across Los Angeles, for each 1% of the bottom income quintiles I remove from the average, the average income of the remaining incomes rises by about 0.8%.

So, here I am just using some basic assumptions:

I assume that the growth of the average US metropolitan area is the growth rate that achieves neutral domestic migration.

For each 1% deviation below that growth rate, I assume that migration has lifted the average incomes of the remainers by 0.8%.

I have the following categories:

Closed Access cities: New York, Los Angeles, Boston, San Francisco, San Diego, San Jose, and Honolulu

Superstars: Seattle, Denver, Austin, Nashville, and Raleigh

San Francisco

The Black line is metropolitan US.

The Red line is per capita income in the Closed Access cities.

The Orange line is per capita income if the poor residents had stayed. The accumulated outmigration by this measure has been about 25% of their populations.

The Blue line is the Superstars

The Dark Green line is San Francisco as is and the Light Green line is San Francisco with neutral migration.

And this is the point I’ve been trying to make.

The Closed Access cities, as a whole, are unexceptional. It looks like, as a group, their local incomes are 31% higher than average, but 24% of that has been from displacement. Only 7% is from agglomeration economies and amenities.

The superstars - cities that have good income growth and also grow faster than average, have incomes 21% higher than average, which we can presume is all from urban productivity and amenities.

Here’s the deal. San Francisco and San Jose are both Closed Access cities and Superstars. San Francisco has income 81% higher than average, and even without the migration, it would be 58% higher.

San Francisco and San Jose are the super-est of the super. And, actually, they aren’t the worst of the Closed Access cities. So, they have higher incomes in general, and they have somewhat higher population growth and lower rates of outmigration than the other Closed Access cities.

But, the reason that something like 770,000 Americans have been displaced from San Francisco is that they are Closed Access. And the process through which families are displaced is that housing costs go up until a family on the margin, in San Francisco, decides that they must give up all the personal, idiosyncratic amenities that are a part of the broader basket of values we call “home”.

That marginal family is poorer for living in San Francisco. They are the price setters. San Francisco isn’t making them rich. It is forcing them into poverty to remain in a location that is “home”, until they decide that staying in San Francisco isn’t worth the poverty.

I am not denying that San Francisco is super. I am not denying that some places have amenities with generalized market value or job markets that provide premium incomes and opportunities.

I am saying that it is being “Closed Access” that displaces families. And it is the discomfort of displacement that sets the marginal price of housing in those cities.

And, furthermore, any group of cities, picked on any characteristic, is going to have a range of members. The Closed Access cities have some members that are very productive or that have easily identified amenities.

But, taken as a group - that group being defined as cities where housing costs have risen more than incomes for several decades and where net domestic migration is perpetually very negative - the Closed Access cities are unremarkable, economically. As a group, they are relatively average. Their collective economic draw is not a remarkable characteristic about them, and so it is not an important factor driving up their costs.

Sure, San Francisco is more special than Los Angeles on that measure. But, even with San Francisco and San Jose - the super-est of the super cities - included in the basket of “Closed Access” cities, the whole basket is pretty average.

As a group, the Closed Access cities are not defined by their “superness”. They are defined by their displacement. And, if you have a mental model of American cities that says “being special makes you expensive” you are making a category error.

And, in a number of different ways, that category error has been an important element in the policies of self-harm that have brought us to the year-of-our-Lord 2024, as the richest nation in the history of the world; whose parks are filling up with tents; whose city council meetings are becoming Malthusian, Luddite anger sessions; and who are lashing out at foreigners and innovators.

Go to the exemplification of the average Closed Access metropolis - New York City - which was also the exemplification of the American tradition of growth, innovation, welcoming of foreigners, and change. It isn’t any more. And the reason it isn’t - the reason the average local cowers at the idea of immigrants coming to town or a new corporate office opening up - isn’t because it’s gotten more special. It’s because it’s gotten more closed. It’s because millions have been displaced, and the remainers are mostly accepting poverty in order to be “home”.