A point I frequently make is that the "Superstar" cities create additional problems because they're constantly displacing trades and service workers. Once a rich neighborhood has established itself and banished the poor and middle class to the hinterlands homeowners have to pay a premium for contractors, cleaners, etc... who are dealing with long commutes through gruesome traffic. In the Boston metro region places like the Back Bay and Beacon Hill are drawing on laborers who live more than an hour away in places like Lawrence, Framingham, and Stoughton.
(Fun bit of trivia about the Back Bay. In the 1970's it was a decrepit neighborhood full of drug dealers, drug users, and prostitutes. A townhouse could be bought for a song if you were brave enough to live there. Now, that townhouse would cost in the seven or eight figures.)
In theory displacing poors is a positive externality. At the neighborhood level people pay a lot of money to displace poors. I can see why people wouldn’t care that poors were leaving.
There are a few unique things going on.
1) rich blue metros just seem to have gone insane on multiple axis, such that pushing out the poors hasn’t produced positive externalities (because the most dysfunctional poors are subsidized)
2) since Covid the displacement has gone upstream. Affordability affects even the upper middle class, and dysfunction affects everyone.
Moreover, the dysfunction isn’t just drug addicts shitting I the street, it’s the entire “elite human capital”.
If the world’s richest man finds San Fransisco unlivable, you’ve got a problem.
3) Peter theil mentioned that a lot of people would like to leave California for tx/fl, but they are “trapped” in 3% mortgages. They may also have lower property tax basis. If not for the 30 year lock in we would see 2020-2021 level outmigration.
I actually agree with you that socioeconomic segregation is a big motivator and it is a big part of what makes high tier neighborhoods more sought after.
But, it's a collective action problem though. Poor families are going to live by somebody. So, everyone trying to keep them out of their area doesn't create any net change.
And, to the extent that poor families have been regionally displaced, as you point out, it didn't really work out very well for those places. And, it's also unconscionable to the extent that it's purposeful. I don't think it is. It would be hard to coordinate in such a way.
I don’t think CA/NY made a conscious effort to price out the poor.
At the level of the most destitute they spend inordinate amounts attracting them (even if attraction is not the goal), so quite the opposite.
I just think that displacement of the lower orders is not the sort of phenomenon that really upsets people that much and hence would prompt action to change things. Obviously, it didn’t for decades.
It’s really only now that it’s become a problem so bad that even the relatively well off feel the pinch and throw in the towel that you’re starting to get pushback.
CA/NY just aren’t producing a cost/amenity tradeoff that the sort of people that matter find attractive anymore, and it’s burning at both the cost and amenity ends.
Great series, honestly I hope you continue, this is an important point. I think it's important to acknowledge the value of living in some of these cities for some of the residents and how that might be connected. It's not just that San Francisco and San Jose are nice cities, it's that they are the two ends of a strip of land that has some of the most important tech companies on Earth. There is a very high value to a lot of people to live in that area. Same for LA and the film industry, New York and the finance industry, etc.
Those are all good points, but actually the main thing that I think needs to be highlighted is that that is only the 2nd worst aspect of the housing crisis.
Economists always focus on the missed productivity, etc. I actually think that's overstated, because if someone really has an economic reason for living in San Francisco, they are going to tend to move there. Their demand elasticity will be expressed as a change in quality. They will move into a 1,000 square foot apartment instead of a 2,500 square foot home. But, for the most part, they are still moving there. When they do, it is the existing families there that have already compromised down all they can who either eat the higher cost or accept displacement.
The main downside of the housing problem doesn't have anything to do with these cities being unique. It's people who are displaced for whom that is painful regardless of whether it's a drought in Oklahoma, coal mines closing in Appalachia, or layoffs in Detroit. It's nothing special about San Francisco.
Economists are always talking about the people who can't move in rather than the people that must move out, and I think the focus has been very wrong.
And, as I was saying earlier in the series, it's just a vibes thing. Nobody says it was a shame about the Okies because Oklahoma is just so special. It was a shame because displacement is always bad. The Okies though Oklahoma was special. But it's not high status to the rest of us, so we don't talk about it that way.
For many of the people who have been displaced from the Closed Access cities, their hardships didn't depend on those cities being high status. It depended on those cities being the places they had belonged to.
100% I think my main point is you have to make the argument carefully, because "nothing special about San Francisco" is clearly not true in a broader sense -- there's only one Silicon Valley and SF is in it. Otherwise it will be easy for people to dismiss the argument.
This is another article that acknowledges that a housing market that does not consider the current labor market and the local economy is a housing market that is “out of touch”. Well done.
There’s got to be a punchy thing to describe this like “lump of labor fallacy”. It’s like a “lump of housing stock fallacy” that a city must be desirable because it essentially doesn’t allow poor people to live there.
A point I frequently make is that the "Superstar" cities create additional problems because they're constantly displacing trades and service workers. Once a rich neighborhood has established itself and banished the poor and middle class to the hinterlands homeowners have to pay a premium for contractors, cleaners, etc... who are dealing with long commutes through gruesome traffic. In the Boston metro region places like the Back Bay and Beacon Hill are drawing on laborers who live more than an hour away in places like Lawrence, Framingham, and Stoughton.
(Fun bit of trivia about the Back Bay. In the 1970's it was a decrepit neighborhood full of drug dealers, drug users, and prostitutes. A townhouse could be bought for a song if you were brave enough to live there. Now, that townhouse would cost in the seven or eight figures.)
In theory displacing poors is a positive externality. At the neighborhood level people pay a lot of money to displace poors. I can see why people wouldn’t care that poors were leaving.
There are a few unique things going on.
1) rich blue metros just seem to have gone insane on multiple axis, such that pushing out the poors hasn’t produced positive externalities (because the most dysfunctional poors are subsidized)
2) since Covid the displacement has gone upstream. Affordability affects even the upper middle class, and dysfunction affects everyone.
Moreover, the dysfunction isn’t just drug addicts shitting I the street, it’s the entire “elite human capital”.
If the world’s richest man finds San Fransisco unlivable, you’ve got a problem.
3) Peter theil mentioned that a lot of people would like to leave California for tx/fl, but they are “trapped” in 3% mortgages. They may also have lower property tax basis. If not for the 30 year lock in we would see 2020-2021 level outmigration.
I actually agree with you that socioeconomic segregation is a big motivator and it is a big part of what makes high tier neighborhoods more sought after.
But, it's a collective action problem though. Poor families are going to live by somebody. So, everyone trying to keep them out of their area doesn't create any net change.
And, to the extent that poor families have been regionally displaced, as you point out, it didn't really work out very well for those places. And, it's also unconscionable to the extent that it's purposeful. I don't think it is. It would be hard to coordinate in such a way.
I don’t think CA/NY made a conscious effort to price out the poor.
At the level of the most destitute they spend inordinate amounts attracting them (even if attraction is not the goal), so quite the opposite.
I just think that displacement of the lower orders is not the sort of phenomenon that really upsets people that much and hence would prompt action to change things. Obviously, it didn’t for decades.
It’s really only now that it’s become a problem so bad that even the relatively well off feel the pinch and throw in the towel that you’re starting to get pushback.
CA/NY just aren’t producing a cost/amenity tradeoff that the sort of people that matter find attractive anymore, and it’s burning at both the cost and amenity ends.
Great series, honestly I hope you continue, this is an important point. I think it's important to acknowledge the value of living in some of these cities for some of the residents and how that might be connected. It's not just that San Francisco and San Jose are nice cities, it's that they are the two ends of a strip of land that has some of the most important tech companies on Earth. There is a very high value to a lot of people to live in that area. Same for LA and the film industry, New York and the finance industry, etc.
Those are all good points, but actually the main thing that I think needs to be highlighted is that that is only the 2nd worst aspect of the housing crisis.
Economists always focus on the missed productivity, etc. I actually think that's overstated, because if someone really has an economic reason for living in San Francisco, they are going to tend to move there. Their demand elasticity will be expressed as a change in quality. They will move into a 1,000 square foot apartment instead of a 2,500 square foot home. But, for the most part, they are still moving there. When they do, it is the existing families there that have already compromised down all they can who either eat the higher cost or accept displacement.
The main downside of the housing problem doesn't have anything to do with these cities being unique. It's people who are displaced for whom that is painful regardless of whether it's a drought in Oklahoma, coal mines closing in Appalachia, or layoffs in Detroit. It's nothing special about San Francisco.
Economists are always talking about the people who can't move in rather than the people that must move out, and I think the focus has been very wrong.
And, as I was saying earlier in the series, it's just a vibes thing. Nobody says it was a shame about the Okies because Oklahoma is just so special. It was a shame because displacement is always bad. The Okies though Oklahoma was special. But it's not high status to the rest of us, so we don't talk about it that way.
For many of the people who have been displaced from the Closed Access cities, their hardships didn't depend on those cities being high status. It depended on those cities being the places they had belonged to.
100% I think my main point is you have to make the argument carefully, because "nothing special about San Francisco" is clearly not true in a broader sense -- there's only one Silicon Valley and SF is in it. Otherwise it will be easy for people to dismiss the argument.
Ah. Yes. Very good point. It's a tough balance to strike, for sure.
This is another article that acknowledges that a housing market that does not consider the current labor market and the local economy is a housing market that is “out of touch”. Well done.
There’s got to be a punchy thing to describe this like “lump of labor fallacy”. It’s like a “lump of housing stock fallacy” that a city must be desirable because it essentially doesn’t allow poor people to live there.