Category: Demographics

  • What Happens When There’s Nobody Left to Move to the City?

    Following up on the Pew study that found many states will face declining work age populations in the future, I want to highlight a recent Atlantic article called “The Graying of Rural America.” It’s a profile of the small Oregon town of Fossil, which is slowly dying as the young people leave and a rump population of older people – median age 56 – begin to pass on.

    Like the Pew study, this one has implications that weren’t fully traced out.

    There’s a lot of urban triumphalism these days, as cities crow about Millennials wanting to live downtown and such.

    But the dirty little secret is that a lot of these places have been growing their youth populations by hoovering up the children of their hinterlands. To the extent that urban population growth is dependent on intrastate migration in these states with declining working age populations, at some point there are just plain going to be a lot fewer youngster to move to the big city. That will start to crimp urban population dynamics.

    Indianapolis is a poster-child for this.  About 95% of the metro area’s net migration has come from elsewhere in the state of Indiana since 2000, according to IRS tax return data.

    Looking at the future, about half of the states counties (49 out of 92) are projected to actually lose population by 2050. Here’s the map from the Indiana Business Research Center.


    Projected population change in Indiana counties, 2010-2050. Source: Indiana Business Research Center

    The entire state is only projected to add 100,000 15-44 year olds by 2050. Even if 100% of them, or even more than 100% of them, are in Indianapolis, this still implies a fairly modest growth rate.

    Given the projected demographics of its migration shed, we should expect Indianapolis to start seeing a falloff in migration. In fact, we are already seeing it. Indy was previously the Midwest champ in net domestic in-migration, but recent Census Bureau estimates show a fall-off.

    Here’s what the IRS migration data says about net migration into Indy metro from the rest of the state.

    Net migration into metro Indianapolis from the rest of the state, 1991-2014. Source: Aaron Renn analysis of IRS county to county migration data

    There was a spike up starting around 1997, the dawn of the dotcom era. This more or less corresponded with the rise of the city talk. (Richard Florida’s Rise of the Creative Class came out in 2002).

    During the 2000s, Indianapolis was the Midwest growth champ, and killed it on net domestic migration. This graph helps explain why.

    But starting around 2010, inbound migration from the rest of the state has fallen off. I don’t want to claim this is entirely demographic related. Migration declined nationally during the Great Recession. And there were some methodology tweaks in this data during that time. But we can see already in the numbers what happens to metro growth if migration from the rest of the state slows down.

    At some point, the decline of rural and small manufacturing counties is going to have to show up in the migration numbers to cities like Indy. Other cities that draw primarily from a national base – like Nashville or Dallas – will be less affected.

    But cities that are dependent on a regional migration shed need to start doing the math on how the decline of their hinterlands will affect them.

    The collapse of rural and small manufacturing economies may have been good for cities in the short term, but those cities might discover down the road that they ended up eating their seed corn.

    Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

  • The End of Job Growth

    Pew Charitable Trusts recently posted an analysis of population projections that show several states with stagnant to declining workforces.

    This means that for nearly 20 states, it’s basically impossible to add jobs in the future. How can you add more jobs with fewer workers?

    That doesn’t mean there won’t be cyclical ups or downs or that some slack in the system might be taken up with some growth, but overall, stagnation to decline in jobs is going to follow.

    Pew’s article mentions states fighting to retain a high skill labor force, but this doesn’t seem very likely. Most of these places are in the north and northeast and have been stagnant for a long time.

    What’s going to change the migration of population to the South and West? While change is always possible, it’s not obvious what might cause it.

    Cities and states need to think hard about what this means for them. It seems to me is that one effect will be to fuel intrastate divergence, as success pools into islands in an era of overall shrinkage. You can argue we’re already seeing this.

    For most localities who aren’t among the favored winners, the reality is that they need to do what I advocated for Buffalo, and find a new psychology of civic improvement that isn’t rooted in growth – in population, jobs, or building stock. (I should add, Buffalo is in a far better position than most and could enjoy a relatively bright future – but it probably won’t be a big growth story)

    This won’t be easy.

    One of the great assumptions of the American worldview is the equating growth with success in our communities. Communities that are adding people, adding jobs, building new things, etc. are seen to be succeeding, whereas shrinking or stagnant ones must be failing.

    Everybody believes this. Even those who talk about “growth without growth” or tout increasing per capita income as the real measure of economic development invariably tout growth if there’s a figure that shows it.

    Lots of urbanists like to pooh-pooh Texas growth, but when 60,000 people move into downtown Chicago, or transit ridership soars in New York, or tech jobs explode in the Bay Area, they immediately tout and trumpet those figures as signs of success.

    And good for them. The point is that we all view growth as the measure of success.

    What would a new psychology look like?

    One example would be the boutique model. Rather than trying to be bigger, you become more exclusive. This isn’t a model that’s applicable to these stagnant places however.

    More realistically, these places need to focus on healing from or managing their problems (including managing decline in some places like rural communities).  Some areas of focus:

    • Pension and debt issues
    • Environmental remediation
    • Segregation
    • Raising educational attainment (to high school at least), even if that means the people subsequently leave
    • Infrastructure
    • Restructuring core services to be sustainable

    Not easy, and realistically requiring outside financial and technical assistance.

    What’s more, this is a to do list, not a psychology of success. How can one begin to articulate a positive, affirmational view of a place’s future that captures some program like this?

    Perhaps there are other ways to think about this too. Please share thoughts in the comments if you have them.

    The key is that with a shrinking working age population, there’s little prospect of job growth. So any governor in one of these places who has that as a long term economic objective is bound to be frustrated. This is a reality that will have to be faced.

    Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

    Top map image via Pew Stateline

  • Luxury Urban Housing, Built on a Myth, Is About to Take a Big Hit

    From steamy Miami to the thriving cores of cities from New York, San Francisco, Houston and Chicago, swank towers, some of them pencil thin and all richly appointed. This surge in the luxury apartment construction has often been seen as validation of the purported massive shift of population, notably of the retired wealthy, to the inner cities. Indeed with the exception of a brief period right after the Great Recession, there was slightly greater growth in core cities than the suburbs and exurbs. It was said that we were in the midst of a massive “return to the city.”

    Yet in reality the movement to the inner core has been much less spectacular than that. Indeed by 2014, growth once again was faster not only in traditional suburbs but also in the exurban areas that were broadly predicted to be the most doomed. At the same time, the fastest city growth, notes economist Jed Kolko, occurred largely in the most “suburbanized” cities, like Phoenix, San Antonio, and San Diego.

    One major meme for the luxury developers had to do with well-off retirees—the one domestic population with the money to afford such housing. Newspapers have been crammed with anecdotal stories about this “trend.” Yet analysis of Census trends among seniors shows that the senior percentage share in both the inner core and older suburbs dropped between 2000 and 2010 while growing substantially in the newer suburbs and exurbs. The most recent data show these patterns continue. Since 2010 the senior population in core cities has risen by 621,000 while the numbers in suburbia have surged by 2.6 million.

    So who’s buying them? It’s wealthy foreign nationals, largely as investments. In many cases these units are not really residences but pieds-a-terres for the world’s wealthy; in some markets, as many as 60 percent of units are not primary residences. But such sales are susceptible to changes in foreign economies. And today, many of these buyers must contend with slowing economies at home.     

    Perhaps most damaging has been the decline in many countries, such as Russia, Brazil, Argentina, Canada and some countries of the Middle East, that have been hit hard by the commodity slowdown. Most critical in many markets, particularly in California, has been the economic slow-down in China, now the largest foreign investor in U.S. real estate. In some markets, like Irvine and in Bay Area suburbs, Chinese investors have accounted for upwards of 30 percent of all buyers.

    Realtors in Southern California, long a favored destination for Asian investors, report a significant slowdown in investment , particularly along the coast. In some developments, roughly half the Chinese buyers paid cash, often well over $1 million per unit. This in markets where barely 10 to 20 percent of the houses are affordable to the median income family.

    Perhaps nowhere in urban America better epitomizes the relationship between foreign capital and high-end real estate than Miami. From 2004 to 2008, Miami enjoyed a massive luxury housing boom, with over 20,000 new units constructed—only to see many go them vacant for years.

    The last five years have seen a resurgence once again. As  fortunes were being minted, foreign money tended to end up invested in Miami’s luxury towers.

    Now this dependence on foreign investment may wreak havoc. Some sources of investment, such as  Russia, are drying up as low oil prices dissipate the wealth of that country’s free-spending oligarchs, and now must cope with sanctions over the annexation of the Crimea. In 2013, Russian buyers accounted for 23 percent of Miami luxury condo buyers; in 2014 they accounted for just 7 percent.

    But in Miami, the big story has been the Latin Americans. Like the Russians, the major Latin American investors have been hard hit by declining oil and other commodity prices. In 2014, luxury developer Gil Gezer thanked Brazilians, for turning around the Miami high-end condo market; now they seem to be driving the market down.  In the fourth quarter of 2015 the number of Miami Beach condo transactions declined nearly 20 percent from a year earlier, while inventory jumped by nearly a third, according to a report from appraisal firm Miller Samuel Inc. The median sales price slipped 6.6 percent. As prices drop and sales slow, more than half a dozen projects have been cancelled.

    South Florida may be the ultimate mecca for luxury developers, but it’s hardly alone in facing a high-end property crash. Over the past decade, New York has been inundated with ultra-expensive high-rise real estate. The new towers have affirmed the city’s fundamental attraction to the ultra rich. In Lower Manhattan, 31 towers with over 5,000 apartments are sprouting up, with a median price for condos of $2.43 million, a 70 per cent increase since 2013. The overall Manhattan condo market has shot up “only” 54% to $1.84 million.

    As in Florida, some of the problem stems from the retreat of foreign investors. Analyst Sami Karan suggests that rather than a massive demographic evidence of a “return to the city” by the ultra-rich, the luxury surge  seems to be mostly a matter of investment strategies that can change more quickly than shifting one’s long-time domicile.

    Not surprising then that some developments are being stalled across Manhattan. Property Markets Group and JDS Development Group, developers of the 111 West 57th Street, a 60-unit tower have announced that the once-imminent sales launch at the 60-unit tower would be pushed back for at least a year. In other cases, once ballyhooed  conversions of office towers to condos—notably the famous “Chippendale” Sony/ATT building located at 550 Madison Avenue—have been shelved, signaling that some well-fed rats may be deserting the luxury yacht before the fall. The city faces what new analysis by the consultancy Miller Samuel could be a glutted luxury market for the next five years.

    But over the past few years, no luxury market has been more over-heated than San Francisco. As occurred in the 1990s, the city’s luxury market has ridden the current tech bubble to unprecedented heights—in the process creating what may be one of the most severe real estate bubbles in the country. In the city proper, the median value of homes has skyrocketed, from $670,000 at the beginning of 2012 to $1.12 million today, a gain of more than 67 percent, according to Zillow.com.

    Now there  are signs that this boom is about to slow. This stems from two factors—the inability of consumers to afford this housing and the gradual slowdown of the tech bubble. The 87 tech IPOs over the past two years are trading 80 percent below their IPO price, and not surprisingly, venture capitalists are become more wary. Many key firms—Twitter, Hewlett Packard, Yahoo—are all laying workers off.

    All this suggests that, as in Miami and New York, San Francisco property owners face stagnant or even declining prices. The market could be further weakened as  tech workers and  companies head to more affordable markets  elsewhere. 

    Right now the decline in the luxury market has not yet turned into a full-on crash in multi-family housing. But there are some worrisome warning signs, such as rising apartment vacancy rates. Already some markets, such as Houston, seem to be overbuilt, particulary given weakness in the area’s critical energy sector. Other urban cores  threatened by overbuilding include such disparate cities as Indianapolis, Raleigh-Durham, Denver and Atlanta. According to the consultancy firm Costar, vacancies in downtown areas are  reaching double digits in such attractive markets as Boston, Charlotte and Philadelphia.

    In some areas like San Francisco and New York, a rollback of multi-family prices could be beneficial, because high prices are driving young, educated people out to other regions. Since 2010 educated millennials have been headed increasingly to more affordable regions such as Nashville, Orlando, New Orleans, Houston, Dallas-Fort Worth, Pittsburgh, and Columbus. Even Cleveland and California’s exurban Inland Empire, which still has relatively reasonable housing prices, at least by California standards, aregrowing their millennial workforces faster than places like New York or San Francisco.

    Young people may also benefit as units shift  from condo to rental.  Of course, the weakening market won’t be too good for the investors, developers and landlords, many of whom embraced the “back to the city” mantra with religious zeal and now will have to confront demographic reality.

    But other trends suggest that this decline may be more painful than many suspect. We may be entering a phase where we have reached  “peak urban millennials” as they head into their 30s, get  married and move  to the suburbs.  The idea that investing in the urban core, and in luxurious density, guarantees a happy result has now lapsed into mythology. It needs to be replaced with something that more accurately effects not what developers hope (or planners decree) but what people need, and can afford.

    This piece originally appeared at The Daily Beast.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the “Demographia International Housing Affordability Survey” and author of “Demographia World Urban Areas” and “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.” He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    Photo by Marc Averette (Own work) [CC BY 3.0], via Wikimedia Commons

  • Can Southland be a ‘New York by the Pacific’?

    Throughout the recession and the decidedly uneven recovery, Southern California has tended to lag behind, particularly in comparison to the Bay Area and other booming regions outside the state. Once the creator of a dispersed, multipolar urban model – “the original in the Xerox machine” as one observer suggested – this region seems to have lost confidence in itself, and its sense of direction.

    In response, some people, notably Los Angeles Mayor Eric Garcetti, favor creating a future in historical reverse, marching back toward becoming a more conventional, central core and transit-dominated region – a kind of New York by the Pacific. Eastern media breathlessly envision our region transforming itself from “car-addicted, polluted and lacking in public transit” into a model of new-urbanist excellence.

    Here’s a basic problem. Their L.A. of the future – the one that wins plaudits from places like GQ magazine – essentially negates the region’s traditional appeal, offering the middle and even working classes, a suburban-like lifestyle in one of the world’s great global cities.

    Vive la difference

    UCLA’s Michael Storper correctly notes how far the Southland has fallen behind its traditional in-state rival, the San Francisco Bay Area. Storper correctly traces much of this gap to the domination of the Los Angeles tech sector by aerospace firms and the fact that this area also had a broad base of nontech-oriented manufacturing.

    Can we become a second San Francisco? Regions, like people, do not easily transform themselves into something else. For one thing, the Los Angeles area’s diverse industrial legacy tended to attract a larger share of historically poorer blacks and Hispanics than the Bay Area, whose population is 33 percent black and Hispanic. In contrast, 55 percent of the five-county Southland area’s population has either Hispanic or African American backgrounds, according to data from the 2014 American Community Survey.

    Read the entire piece at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

  • Suburbs (Continue to) Dominate Jobs and Job Growth

    Data released by the federal government last week provided additional evidence that the suburbs continue to dominate metropolitan area population growth and that the biggest cities are capturing less of the growth than they did at the beginning of the decade. The new 2015 municipality population estimates from the Census Bureau indicated that virtually all of the 15 fastest growing municipalities with more than 50,000 residents were suburbs, and five were in Texas (See Census Bureau poster, Figure 1). Further, in the major metropolitan areas (more than 1,000,000 population), nearly 75 percent of the population growth was in outside the historical core municipalities (the suburbs as defined by municipal jurisdiction).

    But that’s only half of the story. The suburbs and exurbs also continue to dominate employment and employment growth, according to the annual County Business Patterns data. County Business Patterns is a particularly effective measure of genuine job location preferences (both employers and employees), since it largely provides data for private employment.

    Analysis of the data using the City Sector Model indicates that both over the longer and shorter term, the outer reaches of US metropolitan have been more than holding their own in employment growth.

    The City Sector Model

    The City Sector Model classifies small areas (zip codes) of major metropolitan areas by their urban function (lifestyle). The City Sector Model includes five sectors (Figure 2). The first two are labelled as “urban core,” replicating the urban densities and travel patterns of pre-World War II US cities, although these likely fall short of densities and travel behavior changes sought by contemporary urban planning (such as Plan Bay Area). There are two suburban sectors, earlier and later. The fifth sector is the exurbs, outside the built-up urban area. The principle purpose of the City Sector Model is to categorize metropolitan neighborhoods based on their intensity of urbanization, regardless of whether they are located within or outside the boundaries of the historical core municipality (Note).

    Most Jobs are Outside the Urban Core

    The 2014 data indicates that more than 80 percent of employment in the nation’s major metropolitan areas is in functionally suburban or exurban areas (Figure 3). The earlier suburbs have the largest share of employment, at 44 percent. The later suburbs and exurbs combined have 37.0 percent, while the urban cores have 18.9 percent, including the 9.1 percent in the downtown areas (central business districts, or CBDs).

    These numbers reveal dispersion since 2000. Then, the earlier suburbs had even more of the jobs, at 49.4 percent, 5.3 percentage points higher than in 2014. Virtually all of the lost share of jobs in the earlier suburbs was transferred to the later suburbs and exurbs, which combined grew from 31.4 percent in 2000 to 37.0 percent in 2014. The urban cores had 19.4 percent of the jobs (8.8 percent in the CBDs), slightly more than the 18.9 percent in 2014 (Figure 4).

    Things have been much more stable since 2010, with a small loss in the earlier suburbs (-1.1 percentage points), a small gain in the urban core (plus 0.1 percentage points), which includes a 0.3 percentage point gain in the CBDs. The later suburbs gained 1.0 percentage points, while the exurbs held the same share as in 2010 (Figure 5).

    Most Jobs Growth Since 2010 has been Outside the Urban Core

    Between 2010 and 2014, more than 80 percent of the employment growth was in the suburbs and exurbs (Figure 6), approximately the same figure as their overall combined share of employment. The later suburbs have added more than their employment share since 2010 (39.7 percent compare to 24.8 percent), while the earlier suburbs and the exurbs have added a smaller percentage compared to their 2010 share of jobs (30.8 percent versus 45.2 percent and 10.6 percent versus 11.2 percent, respectively).

    In the last year (2013 to 2014), the data has remained similar, with smaller changes in the same direction as before (Figure 7). The earlier suburbs experienced a small loss (0.3 percentage points), while the later suburbs gained 0.2 percentage points, the exurbs gained 0.1 percentage points and the urban cores remained constant (including no change in the CBDs).

    Where the Jobs are By Urban Sector

    There is substantial variation in the distribution of jobs within metropolitan areas.

    Not surprisingly, the largest urban core job concentrations are in the metropolitan areas with older and larger core municipalities. Nearly 52 percent of the employment in the New York metropolitan area is in the urban core, which includes the nation’s largest central business district. Chicago, Washington, Boston and San Francisco, with the next four largest CBDs (though all small compared to New York) also rank among the 10 metropolitan areas with the greatest employment share in their urban cores (Figure 8). Only 16 of the 52 major metropolitan areas had more than 20 percent of their employment in urban cores (36 had 80 percent or more of their employment in the suburbs or exurbs).

    The metropolitan areas with greater job concentration in the earlier suburbs typically experienced more of their growth in the decades immediately following World War II. Hartford has the largest share of employment in the earlier suburbs, at 81.7 percent (Figure 9). Los Angeles, perhaps the original polycentric city, ranks second, at 72.3 percent. This list also includes Rust Belt metropolitan areas that have either grown little or lost population (Detroit, Cleveland, Pittsburgh and Buffalo).

    The metropolitan areas that have had the greatest recent population growth dominate in later suburban and exurban employment (Figure 10). More than 82 percent of Raleigh’s employment is in the later suburbs and exurbs. All but one of the 10 metropolitan areas with the largest job share in the later suburbs and exurbs were among the 15 fastest growing in terms of overall population between 1980 and 2010. The one exception is Grand Rapids, which ranked 27th in growth from 1980 to 2010.

    Balanced Metropolitan Areas

    The meme that people were moving back to the city (urban core) has been with us for decades. For just as long, there have been virtually no reality to the narrative. . The overwhelming share of the population lives and works the suburbs and exurbs. This is where both population growth continues and job growth is concentrated. One fortunate result is metropolitan areas with remarkable balances between home and employment locations, and among the shortest work trip travel times in the world.

    ——

    Note: In some cases the functional urban core extends beyond the boundaries of the historical core municipality (such as in New York and Boston). In other cases, there is virtually no functional urban core (such as in San Jose or Phoenix). Functional urban cores accounted for 14.7 percent of the major metropolitan area population in 2012. By comparison, the jurisdictional urban cores (historical core municipalities) had 26.6 percent of the major metropolitan population, many consisting of large tracts of functional suburban development.

    Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    Photograph: Suburban fringe, St. Louis (by author)

  • Scandinavian Women Do Well, Except at the Top

    In which part of the world should we expect most women to reach the top? The answer has to be the Nordic countries. According to The Global Gender Gap report, for example, Iceland is the most gender equal country in the world followed by Norway, Finland and Sweden. Yet as I will discuss below, this has not translated in women making it to “the top”, as one might expect. This a paradox that I will seek to address.

    Around the world, the Nordic countries are often idealized as the most gender equal places in the world. To a large degree, this admiration is warranted. But it is time to realize that the very same system is holding back women’s ability to reach the top.

    To begin with, the Nordics have a unusual gender equal history. The tradition of gender equality has roots in Viking culture. For example, Scandinavian folklore is primarily focused on men who ventured on longboats to trade, explore and pillage. Yet the folklore also includes shiledmaidens, women chosen to fight as warriors. Byzantine historian John Skylitzes records that women were indeed participating in Nordic armies during the 10th century. The fact that women were allowed to bear arms, and train as warriors, suggests that gender segmentation in early Norse societies was considerably more lax – or at least more flexible – than other parts of contemporary Europe. Evidence also suggests that women in early Nordic societies could inherit land and property, that they kept control over their dowry and controlled a third of the property they shared with their spouses. In addition, they could, under some circumstances at least, participate in the public sphere on the same level as men.

    Medieval law, which likely reflects earlier traditions, supports this notion. Medieval inheritance laws in Norway for example followed family relations through both male and female lines. Additionally, women could opt for a divorce. These rights might not seem impressive today, but they were rather unusual in a historical context. In many contemporary European and Asian societies, the view was that women simply belonged to their fathers or husbands, having little right to property, divorce or inclusion in the public sphere.

    Nordic gender egalitarianism continued after the Viking age, particularly in Sweden. In much of the world, women were excluded from participating, at least fully, in the rise of early capitalism during the 18th and 19th centuries. In essence, free markets and property rights were institutions that initially excluded women. Although Sweden and the other Nordic countries were far from completely egalitarian, they challenged contemporary gender norms by opening up early capitalism for women’s participation.

    As shown below, the World Value Survey has asked respondents around the world whether they believe that men should be prioritized over women if jobs are scares. In modern market economies, fewer agree with this notion. In Switzerland for example, 22 per cent believe that men should have more right to a job than women, compared to 16 per cent in the United Kingdom and 14 per cent in Canada and Australia. Sweden has the lowest share agreeing with this view, merely 2 per cent. Norway (6 per cent) and Finland (10 per cent) are also amongst the countries with egalitarian views.

    In addition, the Nordic welfare states have encouraged women to enter the labor market early on. Still today Nordic countries are ahead of most of Europe in this regard. Child care cost and paid maternity, services provided largely by the public sector in the Nordic welfare states, can in part explain the high labor participation amongst both parents. Such systems are much more extensively funded by the public sector in the Nordics compared to other modern economies, and particularly so compared to the Anglo-Saxon nations. Although even here, the United States, still not a full welfare state, does surprisingly well.

    A long history of gender equality, gender equal norms, many women actively participating in the labor market and family friendly welfare policies – surely this should be seen as the recipe for many women reaching the top of the business world? In the new book The Nordic Gender Equality Paradox I show that this is not the case. In Nordic countries surprisingly few women have made to the top echelons.   

    The OECD gathers information about the proportion of employed persons which have managerial responsibilities in different developed economies. In the table below the share of women managers in different countries is shown as a percentage of the share of male managers. This calculation yields a measure of the likelihood of the average employed women to reach a managerial position compared to the average employed man. The likelihood of a women reaching a managerial position as compared to the same likelihood for a man in the United States is found to be 85 per cent. This is far higher than any other country in the study. As a comparison, the same share is 60 per cent in the United Kingdom and 52 in Sweden. Norway (48 per cent), Finland (44 per cent) and Denmark (37 per cent) score even lower.

    It should be emphasized that this measure includes public sector managers, which inflates the figures for Nordic countries compared to if private sector managers had been studied. The data paints a clear picture: The United States, where welfare state programs do not subsidize women’s parental leave has more women reaching managerial positions than any of the Nordic welfare states.

    Why is it that Nordic countries fail to reach their gender equal potential? Shouldn’t these countries be heads and shoulders above the US when it comes to the share of women climbing to the top? Progressive theorists would naturally assume this. But in reality there is a paradox here; the egalitarianism of the Nordics has clear limits.   At the end of 2014 for example, The Economist ran a story entitled A Nordic mystery

    “Visit a typical Nordic company headquarters and you will notice something striking among the standing desks and modernist furniture: the senior managers are still mostly men, and most of the women are [program administrators]. The egalitarian flame that burns so brightly at the bottom of society splutters at the top of business.”

    As I explain in The Nordic Gender Equality Paradox there is a logical answer to the apparent paradox: policy matters. Numerous studies support the conclusion that the large welfare states in the Nordics, although designed to aid in women’s progress, in fact are hindering the very same progress. Social democratic systems do provide a range of benefits for women, such as generous parental leave systems and publicly financed day care for children. The models however also have features that are detrimental to woman’s careers.

    To give an illustrative example, public sector monopolies in women-dominated areas such as health and education seem to substantially reduce the opportunities for business ownership and career success amongst women. Welfare state safety nets in particular discourage women from self-employment. Overly generous parental leave systems encourage women to stay home rather than work. Substantial tax wedges make it difficult to purchase services that substitute for household work, which reduces the ability of two parents to engage fully in the labor market.

    The Nordic welfare model has, perhaps unintentionally, created a model where many women work but seldom in the private sector and seldom enough hours to be able to reach the top. For example, it might seem as a puzzle why the Baltic countries – which have much more conservative and family oriented cultures – have a higher share of women amongst managers, top executives and business owners than their Nordic neighbors. As shown below, a key factor is difference in working time. In the Nordic societies the average employed man works fully 22 per cent more hours than the average working women. In the Baltic model, where families have greater choice in organizing their lives compared to the Nordic welfare states, the gap is only 9 per cent. On top of this comparison, which looks at working individuals, many Nordic women also take long parental leaves, paid to do so by the welfare state, and thus fall behind in their careers. Of course Baltic mothers are also much concerned for the upbringing of their children. However, many of them solve the equation by getting help from family, perhaps grandmother, to watch the children or buy services to alleviate household work – something easier to do in low-tax countries.

    Thus, for all their gender equal progress, the Nordic countries in fact have relatively few women entrepreneurs, managers and executives. And there is really not a paradox why this situation has developed. It’s all about the policy choices made in the Nordics.

    As is clear, an expansive welfare state may be good for some things, but expanding the ranks of managers for women is not one of them. The feminist heritage that dates back to the age of the Vikings needs to be combined with a more free-market and small government approach if Nordic societies are to fulfill their gender equal potential. Perhaps this is also a lesson to the rest of the world, where progressive policies are often seen as the recipe for promoting women’s careers.

    Nima Sanandaji is the president of the European Centre for Policy Reform and Entrepreneurship (www.ecepr.org) and a research fellow at the Centre for Policy Studies and at the Centre for Market Reform of Education. His latest book, The Nordic Gender Equality Paradox, can be ordered here.

  • Black Residents Matter

    Black lives matter, we’re told—but in many American cities, black residents are either scarce or dwindling in number, chased away by misguided progressive policies that hinder working- and middle-class people. Such policies more severely affect blacks than whites because blacks start from further behind economically. Black median household income is only $35,481 per year, compared with $57,355 for whites. The wealth gap is even wider, with median black household wealth at only $7,133, compared with $111,146 for whites, according to a study by Demos and the Institute on Assets and Social Policy.

    How, then, are cities faring in meeting the aspirations of their black residents, judged especially by the ultimate barometer: whether blacks choose to move to these cities, or stay in them? Among major American cities, three main typologies emerge: the high-flying progressive enclaves of the West, the historically large cities of the Northeast and the Midwest, and the fast-growing boomtowns of the South. Though results vary to some extent, the broad trend is clear: the most progressive-minded cities are either seeing a significant exodus of blacks or, never having had substantial black populations, are failing to attract them. These same cities, home to some of the loudest voices alleging conservative insensitivity to blacks, are failing to provide economic environments where blacks can prosper.

    In theory, prosperous, growing western cities—the San Francisco Bay Area, Portland, Seattle, and Denver—should find it easier to provide upward mobility, as they have fewer disadvantaged people. Far from the South and not part of the Rust Belt industrial complex, they attracted far fewer blacks during the twentieth century’s Great Migration, when millions of blacks moved north. As a result, their black populations are small, compared with those of eastern cities—just 5.6 percent in the city of Portland, for example, compared with 53.4 percent in Cleveland and 46.9 percent in St. Louis. And many western cities are driving their small number of black residents out.

    Portland is part of the fifth-whitest major metropolitan area in America. Almost 75 percent of the region is white, and it has the third-lowest percentage of blacks, at only 3.1 percent. (America as a whole is 13.2 percent black.) Portland proper is often portrayed as a boomtown, but the city’s tiny (and shrinking) black population doesn’t seem to think so. The city has lost more than 11.5 percent of its black residents in just four years. Metro Portland’s black population share grew by 0.3 percentage points from 2000, but that trailed the nation’s 0.5 percentage-point growth. This implies that some of Portland’s blacks are being displaced from the transit- and amenity-rich city to the suburbs that progressives themselves insist are inferior.

    The San Francisco Bay metro area has lost black residents since 2000, though recent estimates suggest that it may have halted the exodus since 2010. The Los Angeles metro area, too, has fewer black residents today than in 2000. The performance in the central cities is even worse. America’s most liberal city, San Francisco, is only 5.4 percent black, and the rate is falling. It’s a similar tale in Seattle—“one of the most progressive cities in the United States,” as a Black Lives Matter protester noted. One city bucking the western trend is Denver. Though the Rocky Mountain city has a small black population—6.1 percent in the region and 9.5 percent in the city proper—that population is growing in both areas, if slowly.

    These figures might not be important if they merely reflected a choice by blacks to move to more auspicious locations, but the evidence suggests that specific public policies in these cities have effectively excluded and even driven out blacks. Primary among them are restrictive planning regulations that make it hard to expand the supply of housing. In a market with rising demand and static supply, prices go up. As a rule, a household should spend no more than three times its annual income on a home. But in West Coast markets, housing-price levels far exceed that benchmark. According to the Demographia International Housing Affordability Survey, the “median multiple”—the median home price divided by the median household income—should average about 3.0. But the median multiple is 5.1 in Portland, 5.1 in Denver, 5.2 in Seattle, 8.1 in Los Angeles and San Diego, 9.4 in San Francisco, and 9.7 in San Jose. As the Demos/IASP report found, differences in homeownership rates between whites and blacks account for a large share of the racial wealth gap. Policies that put the price of homeownership out of reach for black families exacerbate the problem.

    Even some on the left recognize how development restrictions hurt lower- and middle-income people. Liberal commentator Matt Yglesias has called housing affordability “Blue America’s greatest failing.” Yglesias and others criticize zoning policies that mandate single-family homes, or approval processes, like that in San Francisco, that prohibit as-of-right development and allow NIMBYism to keep out unwanted construction—and, by implication, unwanted people. They don’t mention the role of environmental policy in creating these high housing prices. Portland, for example, has drawn a so-called urban-growth boundary that severely restricts land development and drives up prices inside the approved perimeter. The development-stifling effects of the California Environmental Quality Act (CEQA) are notorious. California also imposes some of the nation’s toughest energy regulations, putting a huge financial burden on lower-income (and disproportionately black) households. Nearly 1 million households in the Golden State spend 10 percent or more of their income on energy bills, according to a Manhattan Institute report by Jonathan Lesser. While liberals are quick to point out that in suburban communities, land-use restrictions that appear race-neutral can be functionally discriminatory, they don’t acknowledge that their own environmental-based restrictions on housing and energy are similarly exclusionary.

    The Windy City’s black population loss accounted for the lion’s share of the city’s total shrinkage during the 2000s.

    In some cases, western cities’ support for gentrification has come at the expense of long-standing black communities. In Portland, residents of the historically black Albina neighborhood complained about bike lanes—a progressive fetish—being built in their neighborhood. In Oakland, recent upscale arrivals got the government to cite Pleasant Grove Baptist Church, a fixture in the city for 65 years, for creating a public nuisance—because its gospel-choir practice was disturbing the newcomers.

    During the Great Migration, cities of the Midwest and the Northeast were industrial magnets, sucking in vast quantities of labor not just from the American South but also from Europe. As northern industry declined during the Rust Belt era, the great northern cities fell on trying times, and black residents, who had struggled to gain equal opportunity in factory jobs and in housing, were hit hard. Racial turbulence, often including riots, intensified, and helped drive a white exodus. Suburb-bound whites left behind an often-impoverished black underclass in segregated neighborhoods that, in many cases, remain so today.

    The most distressed cities in this region are the usual suspects: Detroit, Cleveland, Flint, and Youngstown. All have declining black populations, both in their urban cores and region-wide. Others, like St. Louis, have maintained their black populations only through natural increase (births outnumbering deaths). They are losing black residents to migration.

    The greatest demographic transition is taking place in Chicago. The Windy City’s black population loss of 177,000 accounted for the lion’s share of the city’s total shrinkage during the 2000s. Another 53,000 blacks have fled the city since 2010. In fact, the entire metro Chicago area lost nearly 23,000 blacks in aggregate, the biggest decline in the United States.

    By contrast, in northern cities with more robust middle-class economies—even if job growth doesn’t match Sunbelt levels—black populations are expanding. Since 2010, for example, metro Indianapolis added more than 19,000 blacks (6.9 percent growth), Columbus more than 25,000 (9 percent), and Boston nearly 40,000 (10.2 percent). New York’s and Philadelphia’s black population growth rates are low but positive, in line with slow overall regional growth. Washington, D.C., a traditional hub of black American life, is seeing declining black population share in the district itself, but the overall D.C. region continues to show solid black population growth.

    The somewhat unlikely champion for northern black population growth is Minneapolis–St. Paul. Though its black population makes up a much smaller proportion than many of its midwestern peers—at only 8 percent in the region and 19.5 percent in the city—Minneapolis’s black population has grown at a strong rate. Since 2010, the black population in the city has grown by 15,000 people, or 23 percent. The region added 30,400 black residents, growing by 12.1 percent. Part of the Minneapolis story (and that of Columbus as well) involves an influx of Somali immigrants—the metropolitan area has more Somalis than anywhere else in the United States. But immigration doesn’t explain everything. Minneapolis is also the third-leading destination for blacks leaving Chicago (behind Atlanta and Davenport, Iowa). About 1,000 black Chicagoans make the move north every year.

    Obviously, many blacks like what they see in places like Minneapolis, Indianapolis, and Columbus. One key is a development environment that keeps housing affordable. This is dramatically clear in Minneapolis, a liberal, historically white city often likened to western cities like Seattle and Denver. But being more housing-development-friendly, and also perhaps in part because of its famously brutal winters, Minneapolis is much more affordable than those cities, with a home-price median multiple of only 3.2. Similarly, in Columbus (with a median multiple of 2.9) and Indianapolis (also 2.9), black families can afford the American dream. When cities get the basics (planning policy, job growth, and reasonable taxation levels) right, even tough winters are no obstacle to a growing population—of whites and blacks.

    Where else do blacks go when they leave declining Rust Belt cities? Some seek opportunity in better-off regional cities, but others head to smaller regional communities that, if anything, are even worse off. Census Bureau data suggest that a significant number of blacks leaving Chicago are ending up in struggling downstate Illinois communities like Danville or Carbondale, where they’re unlikely to find economic opportunity. Why move to these places? One answer: they’re dirt cheap. But there’s a particular reason for that—demand has collapsed along with local economies. This creates a false allure. Harvard economist Edward Glaeser noted that some failing cities become so cheap that they turn into “magnets for poor people.” This left-behind population of blacks in places with low opportunity will prove challenging for these regions. The North also remains racially stratified. Milwaukee, New York, and Chicago are the three most segregated regions in the country. The maps of where black and white residents live in cities like Detroit shock the conscience. Urban school districts tasked with educating predominantly black students are failing miserably. Powerful public-employee unions make reform a difficult prospect.

    But for those blacks leaving the West, Midwest, and Northeast, one destination dominates: the South. A century ago, in search of economic and social opportunity, blacks were leaving the South to go north and west; today, they are reversing that journey, in what the Manhattan Institute’s Daniel DiSalvo dubbed “The Great Remigration” (Autumn 2012). DiSalvo found that blacks now choose the South in pursuit of jobs, lower costs and taxes, better public services (notably, schools), and sunny weather for retirement. The new arrivals aren’t solely working-class, either. Even better-off blacks, with household incomes over $100,000, are heading south from cities like Chicago.

    Historically, Southern blacks lived in rural areas. A large rural black population remains in the South today, often living in the same types of conditions as rural whites, which is to say, under significant economic strain. But the new black migrants to the South are increasingly flocking to the same metro areas that white people are—especially Atlanta, the new cultural and economic capital of black America, with a black population of nearly 2 million. The Atlanta metro area, one-third black, continues to add more black residents (150,000 since 2010 alone) than any other region.

    In Texas, Dallas has drawn 110,000 black residents (11.3 percent growth) and Houston just under 100,000 (9.2 percent) since 2010. Austin, a rare liberal city in the South, remains, at 53.4 percent, the whitest major Texas metro—Dallas and Houston double its black population share—but it, too, has seen strong black population growth. Miami, with its powerful Latino presence that includes both historically American as well as Afro-Latinos, also added about 100,000 blacks (8.3 percent). Today, Dallas, Houston, and Miami are all home to more than 1 million black residents.

    Many smaller southern cities—including Charlotte, Orlando, Tampa, and Nashville—are also seeing robust black population growth. Even New Orleans has seen a rebound in its black population since 2010. Not surprisingly, these southern cities are extremely affordable. A combination of pro-business policies combined with a development regime that permits housing supply to expand as needed has proved a winner. Among these southern cities, only Miami, with its massive influx of Latin American wealth, is rated as unaffordable, with a median multiple of 5.6. In addition to their sensible policies, many of these southern cities have also viewed their black communities not as a problem to be solved but as a potential civic asset and engine of growth. Atlanta embraced its emerging status as the capital of black America. Houston famously opened its doors and offered temporary shelter to thousands of poor black residents of New Orleans displaced by Hurricane Katrina. Many of those refugees stayed in Houston, attracted by its job opportunities and quality of life.

    Blacks are returning to southern cities, like Atlanta, drawn by economic opportunity and lower costs, especially compared with progressive cities like San Francisco, where restrictive housing policies have made living unaffordable for many. JIM WILSON/THE NEW YORK TIMES/REDUXBlacks are returning to southern cities, like Atlanta, drawn by economic opportunity and lower costs, especially compared with progressive cities like San Francisco, where restrictive housing policies have made living unaffordable for many. JIM WILSON/THE NEW YORK TIMES/REDUX

    These regional trends reveal two basic patterns. First, like whites, blacks are attracted by strong, broad-based economies. Pro-growth polices that allow workaday, not just elite, businesses to flourish are foundational to inclusive success. Second, with lower household incomes, black families are vulnerable to high housing costs. A few high-cost cities attract black residents; but for the most part, blacks are flocking to cities that are not only economically vibrant but generally affordable. Even strong urban economies can’t keep blacks from being displaced from cities, such as many on the West Coast, where housing costs remain stratospheric.

    Another conclusion revealed by the data: when it comes to how state and local policies affect black residents, the track record of the most liberal cities in the United States is truly dismal. These results should be troubling to progressives touting blue-state planning, economic, and energy policies as models for the nation. After all, if wealthy cities like San Francisco, Portland, and Seattle—where progressives have near-total political control—can’t produce positive outcomes for working-class and middle-class blacks, why should we expect their urban approach to succeed anywhere else?

    This piece first appeared at The City Journal.

    Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

  • Where Millionaires Are Moving

    In this oligarchic era, dominated as never before in modern history by the ultra-rich, their movements are far more than grist for gossip columns. They are critical to the health of city economies around the world.

    recent study by the consultancy New World Wealth traces this movement globally, identifying the big winners and losers in millionaire migration. It defines millionaires as those with net assets of at least $1 million outside their personal residence – generally, people with sizable investment capital or their own businesses.

    Among the countries that saw the largest outflows in 2015 are two where property rights are not the most secure: Russia and China. China ranks second in net outflows (-9,000) and Russia sixth (-2,000).

    Another big factor: public safety. France lost an estimated 10,000 net affluents last year, many of them after the terrorist attacks, the largest outflow of any country, according to New World Wealth. Other big losers were struggling economies, including hard-hit Italy and Greece. In fourth place is India, a country that has exported its wealthy around the world for generations.

    The country that was the biggest landing pad for the wealthy last year was Australia, gaining a net 8,000 millionaires. The country is popular most notably with Chinese investors as well as those from other Asian countries. In second place was the United States (7,000), followed by Canada (5,000) and, surprisingly, Israel (4,000). The United Arab Emirates (3,000) and New Zealand (2,000) round out the top six.

    Favorite Cities Of The Affluent

    Zooming in to the city level, the flows are a bit more surprising. The biggest winners are not the elite global cities, like New York or London, but ones that are comfortable, and boast pretty settings and world-class amenities. The leading millionaire magnets in 2015 were Sydney and Melbourne, gaining 4,000 and 3,000 millionaires, respectively, many from China. In third place is Tel Aviv, a burgeoning high-tech center which is attracting Jews fleeing Europe, notably from France.

    Dubai ranks fourth, luring many Middle Easterners seeking a safer, cleaner business locale. Then comes a series of some of the most attractive cities on the planet, including Seattle (seventh) and Perth (eighth). In many cases these cities are gaining from “flight capital” from Asia and the Middle East.

    London, long considered a primary haven for the mobile rich, actually lost a net 500 millionaires in 2015. Many, according to the study, are moving to other parts of the United Kingdom, often the countryside, or to other English-speaking countries.

    But the biggest losers by far were declining first-world cities, many of which have never fully recovered from the 2007 financial crisis. These include Paris, which saw a net outflow of 7,000 millionaires, the most in the world. Not surprisingly, many of the exiting Parisians are Jewish, and many are headed to Israel. There are widespread reports that more of that city’s estimated 350,000 Jews may also be considering an exit. Overall migration from France to Israel rose in 2015, with 7,469 leaving for the Jewish State, up from 6,658 in 2014 and 3,263 in 2013.

    Elsewhere in Europe, Rome lost 5,000 and Athens 2,000 amid poor economic conditions and perilous fiscal situations in their countries.

    Chicago lost 3,000 millionaires in 2015. Although the city continues to attract top-drawer corporate headquarters and luxury housing, the city’s economy is far from thriving, and there is growing concern about a rise in crime rates and growing racial tensions. Unlike other exiting millionaires, who often change countries, most of those leaving Chicago headed to other parts of the U.S.

    Why It Matters

    The movement of wealthy people matters increasingly in globalized societies, which allow money and ideas to relocate with relative ease. Investors, entrepreneurs and innovators are extraordinarily mobile by nature. They also bring with them capital, connections and tax revenues that are then lost to their former host countries and cities. There is also an employment impact. New World Wealth estimates that 30% to 40% of the millionaires they have tracked are business owners.

    Keeping the rich and luring more is a priority now widely embraced by many urban developers and politicians. Former New York Mayor Michael Bloomberg has suggested that today a successful city must be primarily “a luxury product,” a place that focuses on the very wealthy whose surplus can underwrite the rest of the population. “If we can find a bunch of billionaires around the world to move here, that would be a godsend,” Bloomberg, himself a multi-billionaire, said toward the end of his final term. “Because that’s where the revenue comes to take care of everybody else.”

    This reliance on the rich, notes a Citigroup study, reshapes urban economies, not always for the best. Their presence creates an urban employment structure based on “plutonomy,” an economy and society driven largely by the wealthy classes’ investment and spending. A 2014 Brookings report found that virtually all the most unequal U.S. metropolitan areas – with the exception of Atlanta and Miami — areas are luxury-oriented cities including San Francisco, Boston, Washington D.C., New York, Chicago and Los Angeles. Although the number of high-wage jobs has increased in these places, much of the new employment has been in low wage service jobs. As urban studies author Stephen J.K. Walters notes, these cities tend to develop highly bifurcated economies, divided between an elite sector and large service class. “This,” he notes, “is the opposite of [Jane] Jacobs vision of cities that as places that are “constantly transforming many poor people into middle class people.’ ”

    One clear effect is on housing prices, which have shot up precisely in those places now favored by the rich. Perhaps the most obvious case is Vancouver, where the inflow of predominately Chinese investors has helped make the Canadian city among the most unaffordable in the world, with median home prices breaking the million-dollar mark.

    Yet if the presence of the rich creates more inequality, their departure could also have some nasty effects. The movement for example of one billionaire — hedge fund manager David Tepper — from New Jersey to Florida could leave the Garden State with a $140 million hole just from his change of address. Overall New Jersey depends for 40 percent of its revenue of income taxes, one-third of which is paid by the top 1 percent of the population.

    Such movements could become more common, as affluent people look for more relaxed and less heavily taxed communities to settle in. A 2016 study by Phoenix Marketing International found that the fastest-growing millionaire populations in the country are not in big luxury cities but smaller towns like Mount Airy, N.C.; Cookeville, Tenn.; and Kalispell and Bozeman, Mont.

    Despite this year’s campaign rhetoric, the influence of affluent migration is likely to become greater in the years ahead. The number of American households with assets of $1 million or more, not including their primary residence, increased 3 percent last year to 10.4 million, according to Spectrem Group, a market research and consulting firm. Meanwhile, the number of American households worth $25 million or more has grown 73 percent since 2008, compared with growth of 54 percent for millionaire households.

    For communities around the world the choice is increasingly a Hobbesian one. Attract more of the wealthy to town, and see housing prices soar beyond the reach of the middle class, or push the rich away, and live with the likely loss of jobs, tax revenues and businesses. In a world dominated by oligarchy, these are the realities which countries and cities now have to confront.

    This piece first appeared in Forbes.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Sydney photo by Christopher Schoenbohm.

  • Coastal California Getting Older, Not Bolder

    For the better part of a century, Southern California has been seen as the land of surfers, hipsters and youthful innovators. Yet the land of sun and sea is becoming, like its East Coast counterpart Florida, increasingly geriatric.

    This, of course, is a global and national phenomenon. From 2015-25, the number of senior-headed U.S. households, according to the Joint Center on Housing Studies at Harvard University, will grow by 10.7 million, compared with 2.5 million households headed by people ages 35-44.

    After some delay, this aging process is accelerating in California. Large-scale immigration, which supplied a younger population for decades, is slowing markedly. Once considerably younger than the country, the state appears to be heading toward the national median age. Since 2000, the senior population in Southern California has grown by 24 percent compared with 18 percent nationally. Unless immigration or domestic migration pick up soon, this aging trend should accelerate.

    At the same time, our analysis shows that some areas – notably along the Orange County coast – are rapidly becoming virtual retirement communities, with a diminishing number of children and young families. For those sitting in their houses in affluenza-afflicted enclaves of Southern California, this may seem good news: “aging in place” while their homes increase in value. But this trend is less a boon for younger people, particularly families, as well as for companies seeking to launch and expand here.

    Read the entire piece at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the “Demographia International Housing Affordability Survey” and author of “Demographia World Urban Areas” and “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.” He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    “Senior Citizens Crossing” photo by Flickr user auntjojo.

  • Millennial Home Ownership: Disappointment Ahead in Some Places?

    Millennial renters overwhelmingly plan on buying their own homes, though affording them could be far more challenging than they think. This is an important conclusion from a renters’ survey by apartmentlist.com, an apartment search website (See: The Affordability Crisis: Are Millennials Destined to be Renters?). Apartmentlist.com matched results from its own survey of prospective renters that visit its site with housing market data from more than 90 metropolitan areas around the country, The most revealing finding:  Millennials intend to purchase their own homes, but that housing affordability is the greatest barrier. According to apartmentlist.com, the problem is the greatest on the West Coast, New York and Miami (See Figure “% of Millennial Renters that Can’t Afford to Buy”, from apartmentlist.com):

    In nearly all the metros we looked at, affordability was the #1 reason for delaying homeownership, but millennials on the west coast struggled the most: Portland, San Diego, Seattle, Los Angeles, and San Francisco all had more than 80% of renters listing affordability as a concern. Miami and New York, expensive metros with many cost-burdened renters, were #6 and #7 on the list.

    Perhaps surprisingly, two metropolitan areas that have been among the greatest beneficiaries of the housing affordability driven net domestic migration from coastal California, Portland and Seattle, scored the worst on affordability as a barrier to purchasing homes (90 percent and 89 percent respectively). These areas were once much less expensive in the past, but are rapidly catching up with California in terms of unaffordability.

    The Preference for Home Ownership

    The apartmentlist.com survey found that 79 percent of Millennials eventually plan to become home or apartment owners, while only six percent expect to rent for their whole lives. The balance (15 percent) are not sure. This 79 percent preference for home ownership is well above the current homeownership rate of approximately 64 percent.

    The preference for home ownership was pervasive in the apartmentlist.com data. Among the 50 metropolitan areas with more than 1,000,000 population, none scored below two thirds (67 percent) in Millennial home ownership preference. This is, again, above the national home ownership rate. The lowest home ownership preference among these was in Las Vegas. The highest preference for home ownership was in Rochester, at 94 percent. Charlotte and Salt Lake City also scored a 90 percent home ownership preference.

    Millennials indicated a strong preference for home ownership even in metropolitan areas that have depressed home ownership rates. In 2015, Los Angeles had the lowest home ownership rate of any major metropolitan area, at 49 percent, yet 76 percent of the area’s Millennials intend to own their own homes. In New York, with only a 50 percent homeownership rate, 74 percent of Millennials plan on buying their own homes. In San Jose, with only a 51 percent home ownership rate, 74 percent of Millennials aspire to buy their own homes. In San Diego, the home ownership rate was 52 percent, yet the interest in home ownership was half-again higher (78 percent). In San Francisco, where the home ownership rate is 56 percent, 76 percent expressed an interest in owning their own homes (home ownership rates calculated from Census Bureau quarterly data from 2015).

    The story is the same in the metropolitan areas often characterized as magnets for Millennial migration. In Portland and Denver, 81 percent of Millennials anticipate owning their own homes. Boston (78 percent), Seattle (77 percent) and Minneapolis-St. Paul (77 percent) are not far behind.

    Saving for Decades

    This data suggests that many Millennials could need to relocate to afford their own homes. The really innovative contribution of the apartmentlist.com research is as estimate of how long it will take the average Millennial to save enough money for a down payment on a starter home, which according to Trulia, is generally defined as the lower third of the market.

    Apartmentlist.com develops an estimate for each metropolitan area, using monthly savings rates, existing savings and the potential for financial assistance (for example from relatives) in obtaining enough for the down payment. In the most costly market, San Francisco, the average Millennial will need more than 28 years to build up enough funding for a down payment in San Francisco. This means that older Millennials would be old enough (62) to qualify for early retirement benefits from Social Security by the time they have enough to pay the down payment on a starter home. Sacramento is nearly as challenging, where it would take another 27 years to accumulate a down payment. Things are not that much better in Los Angeles (20 years), San Diego (19 years) and Denver (18 years).

    Optimistic Expectations and Disappointment

    But the most important bottom line conclusion of the research is what apartmentlist.com calls the “affordability gap.” This is the difference between the actual time required to accumulate a down payment and the time expected by survey respondents. The biggest affordability gap is in San Francisco, where respondents expected down payment requirements that would take only 11 years more to save. The reality, according to the study, is 28 years, more than 2.5 times that figure. In Sacramento, respondents expected that it would take 16 years, still far short of the more realistic 27 years. In Los Angeles, San Diego and Denver, it is likely to take from eight to ten years more to save enough for a down payment than survey respondents estimate.

    Setting up for More Domestic Migration

    In contrast, in a number of other metropolitan areas, such as Houston, Dallas-Fort Worth, Atlanta, Philadelphia and Kansas City, Millennials have over-estimated the size of down payments necessary to enter the housing market.

    For some time, domestic migration trends in the United States has been principally about moving from more expensive metropolitan areas to less expensive metropolitan areas. The apartmentlist.com data suggests that this trend could continue. To achieve their dreams of home ownership and to avoid a life of renting, many Millennials may move to places where housing is priced more for livability.

    Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the “Demographia International Housing Affordability Survey” and author of “Demographia World Urban Areas” and “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.” He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    Photo by Bigstockphoto.com.