(Bloomberg Opinion) — College graduates and more affluent residents are fleeing high-cost cities like New York and San Francisco, according to a recent New York Times article. Of course, major coastal cities have been pricing out the working class for a long time, but that’s picked up pace in recent years.
Lower-cost, large metros are benefiting from the migration — also a trend that’s been happening for a while. But a new twist we saw begin during the pandemic is that people are choosing to move to mid-sized and smaller places as well — metros with fewer than 1 million people.
The bottom line is that the universe of landing spots for college grads from high-cost metros is expanding. That’s a healthy trend for the economy that we should try to help along.
One of the big draws of high-cost cities is that they have great amenities — restaurants and retail and services — but it’s difficult to build more housing. It can be even more challenging to improve schools that desperately need it.
Smaller cities usually have more affordable housing, especially if a worker is coming from one of the most expensive parts of the country. The public schools are generally more attractive to parents, too. What these places lack is the abundant range of appealing amenities found in the biggest metros. But here, too, the smaller cities have an advantage: It’s easier to build amenities than it is to build housing. So maybe this can be part of the solution to our housing shortages: a focus on developing the infrastructure bells and whistles needed to attract new residents to places where it’s easier to find an affordable place to live.
The idea builds on something I noticed a little over a year ago: a shortage of “Whole Foods neighborhoods” in some of the higher-profile Sunbelt destinations where affluent people moved during the pandemic. At this point, and I can attest that this is the case in Atlanta where I live, the neighborhoods with more upscale amenities have become quite pricey — if you can actually find anything to buy. So the value proposition for would-be migrants is harder to find.
But the search for cheaper housing and good schools will continue, and for many metro areas that weren’t previously a natural destination for affluent migrants, this is an economic development opportunity they’ve never had before. There are plenty of perfectly fine communities with a lot of older households filled with empty nesters. The amenities are dated, with many antiquated commercial real estate developments built decades ago for a different kind of economy and a different way of living.
This is where empty office buildings can be an asset rather than a liability. It’s an opportunity for developers to build mixed-use concepts that will be attractive to the kinds of people leaving New York and San Francisco. A mid-sized metro has no hope of replicating the density and scale of a major city, but a 35-year old’s household with kids might not need or want all that — a lifestyle center with a good coffee shop, some family-friendly restaurants and plenty of parking might do just fine.
Creating more amenities in previously un-hip metros and communities doesn't relieve these places of the need to build more housing. In some of the higher-profile destinations during the pandemic — places like Austin and Boise, Idaho — we saw well-off Californians moving in and driving up housing costs, which merely shifted the displacement burden of lower-income residents from one metro to another. College grads with high incomes in places like New York and San Francisco have more migration options than ever — but the flipside of that coin is the threat of displacement has spread from the working class on the coasts to the working class potentially everywhere.
Even so, I find this trend encouraging. The shrinking geography of opportunity that we saw in the US between the 1970s and 2010s was generally a bad thing. By the end of it, even the "winners" didn't seem to like it very much, with local political backlashes against the wealth and clout of tech and finance workers in the cities where those industries clustered.
Now, more communities are able to compete for that talent and economic opportunity, and there’s a better chance of addressing persistent housing shortages if dozens of metros are tasked with doing something about it rather than merely a few.
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Conor Sen is a Bloomberg Opinion columnist. He is founder of Peachtree Creek Investments.
