Tag Archives: Migration

America’s Forced Financial Flight From Unaffordable And Dysfunctional Cities

The forced flight from unaffordable and dysfunctional urban regions is as yet a trickle, but watch what happens when a recession causes widespread layoffs in high-wage sectors.

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(Charles Hugh Smith) For hundreds of years, rural poverty has driven people to urban areas: cities offer paying work and abundant opportunities to get ahead, and these financial incentives have transformed the human populace from largely rural to largely urban in the developed world.

Now a new set of financial pressures are forcing a migration of urban residents out of cities which are increasingly unaffordable and dysfunctional. As highly paid skilled workers and global capital have flooded into high-job-growth regions, living costs and the costs of doing business have skyrocketed: where not too long ago $1,000 a month would secure a modest one-bedroom apartment in major urban job centers, now it takes $2,000 or $3,000 a month to rent a modest flat.

Wages for the average worker have not doubled or tripled, and this asymmetry between soaring living costs and stagnant incomes is driving the exodus out of cities that are only affordable to the top 10% of wage earners, or those who bought a house decades ago and have locked in low property taxes.

Gordon Long and I discuss this forced migration in a new video program. It’s important to note that we’re not talking about economy-wide inflation or the general rise in the cost of living; we’re talking about the hyper-drive cost increases that characterize high-cost urban areas.

I’ve addressed economy-wide real-world inflation many times,for example:

The Burrito Index: Consumer Prices Have Soared 160% Since 2001 (August 1, 2016)

Burrito Index Update: Burrito Cost Triples, Official Inflation Up 43% from 2001 (May 31, 2018)

In high-cost urban regions, burritos aren’t $7.50; they’re $10 or $12. Parking tickets aren’t $15, they’re $60, and so on.

Consider this chart of rents in the San Francisco Bay Area: unless the household’s income has shot up in parallel with rents, this cost of living is simply unaffordable.

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Here are the dynamics driving this financially forced flight, which hits the young especially hard: who can afford to buy a house when cramped, decaying 100-year old bungalows are $900,000 and property taxes are $15,000 or more? Who can afford to have kids when childcare costs a small fortune?

The elderly retired who don’t own a house free and clear are also being priced out of these regions.

1. Household income is stagnating as real-world inflation erodes the purchasing power of income: rent, housing, childcare, healthcare, dining out are all rising far faster than “official” inflation of 2% annually.

2. Prices in high-cost urban zones are increasing faster than in less pricey regions. Areas with job growth are experiencing supply-demand imbalances in rent and housing. Only top earners can afford to buy a home.

3. Young households are burdened with student loan debt, making it financially difficult to buy a home in a pricey urban zone and start a family. The only way to afford a home and children is to move to a region with affordable housing and living costs.

4. Income in high-cost urban areas is more heavily skewed by “winner take most” dynamics of finance and technology; the Pareto Distribution of 20% earn 80% of the income is extended so the top 4% take 64% the income. Even above-average incomes are not enough to support a traditional middle-class lifestyle.

5. Local government services cost more in high-cost urban areas, and so cities and municipalities are relentlessly increasing taxes, fees and licensing, pressuring all but the top tier of households.

6. The sacrifices required to live in high-cost urban areas are no longer worth it: traffic congestion, long commutes, high-stress jobs, homelessness and decaying infrastructure are outweighing the benefits of hipster urbanism.

Although it’s verboten to mention this in the we’re so fabulous local media, many of these high-cost urban regions are hopelessly dysfunctional. Taxpayers have ponied up billions of dollars in new taxes, fees and bond measures, and yet none of the problems that make daily life miserable ever get better.

At some point, the urban hipsterism that seemed so cool and appealing becomes just another example of the Haves and Have-Nots: how many households can afford $200+ for a meal and drinks at the latest foodie-fusion bistro? What level of sainthood is required to tolerate the traffic or crowded public transport to get to the hipster paradise, including avoiding the bodies, needles and other detritus of the entrenched homeless on the sidewalks?

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The forced flight from unaffordable and dysfunctional urban regions is as yet a trickle, but watch what happens when a recession causes widespread layoffs in high-wage sectors and suddenly the hipster bistro that was always jammed is empty, and then shuttered. To replaced the taxes lost to layoffs and closed businesses, the political class will have no choice but to launch a frenzy of higher taxes, fees and surcharges on those left behind.

Source: by Charles Hugh Smith | Of Two Minds

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Over 150 People Move Out Of Chicago Every Day

With its nation-leading murder rate, lake-effect weather, endemic corruption and financial mismanagement, who really wants to live in Chicago? Well, the data is in, and as Mayor Rahm Emmanuel prepares to hand power to a new administration next year, his legacy – already marred by the above-mentioned scourges – has accrued another ignominious distinction. According to Census data analyzed by Bloomberg, Chicago experienced the highest daily net migration in the US, losing 156 residents a day (strictly due to migration, not murder) a day in 2017.

After Chicago, Los Angeles came second with 128, followed by New York with 132.

On the other side of that coin were cities across the US sun belt, like Dallas (No. 1, with 246 net incoming), followed by Phoenix (with 174) and Atlanta (No. 3 with 147).

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In terms of total net migration for the year, the tallies differed only slightly. While the sun belt was the biggest beneficiary of Americans’ growing preference for sunnier weather, lower rents and plentiful job opportunities…

Dallas was the greatest beneficiary of this domestic migration, adding nearly 59,000 domestic movers in 2017, followed by Phoenix (51,000) and Tampa (41,000), which serve as anchors for the western and southern regions that got the bulk of the gains.

…some of America’s largest cities saw net outflows as rising rents, crumbling (or inadequate) public infrastructure. The city with the biggest outflow was NYC, followed by Los Angeles and – in third place – beautiful Bridgeport, Conn.

On the flip side, more than 208,000 residents left the New York City metropolitan area last year. This was nearly twice as many as the second biggest loser, Los Angeles, which had a decline of nearly 110,000. Chicago fell by 85,000. Honolulu, San Jose, New York and Bridgeport, CT lost the highest shares of their residents to other parts of the country.

In Chicago, New York and Los Angeles, the three areas with a triple-digit daily exodus, people are fleeing at a greater rate than just a few years earlier. Soaring home prices and high local taxes are pushing local residents out and scaring off potential movers from other parts of the country.

But maybe if Emmanuel’s successor can successfully implement the outgoing mayor’s plans for a city wide UBI (which we imagine would go a long way toward offsetting its hated ‘amusement tax’ and other levies needed to pay off the city’s brutal debt burden), maybe he can bribe residents into staying.

Source: ZeroHedge

California Tops National Poverty Rate As Prime Tax Donkey Demographic Plans “Exodus” From State

Despite efforts by state legislators at creating a socialist utopia, California still has the highest poverty rate in the nation at 19%, despite a 1.4% decrease from last year according to the Census Bureau. 

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Poverty and income figures released Wednesday reveal that over 7 million Californians are struggling to get by in the second most expensive state to live in, according to the Council for Community and Economic Research‘s 2017 Annual Cost of Living Index. 

And while California has a “vigorous economy and a number of safety net programs to aid needy residents,” according to the Sacramento Bee, one out of every five residents is suffering economic hardship – which is fueled in large part by sky-high housing costs, according to Caroline Danielson, policy director at the Public Policy Institute of California. 

“We do have a housing crisis in many parts of the state and our poverty rate is highest in Los Angeles County,” she said, adding that cost of living and poverty is often highest in the state’s coastal counties. “When you factor that in we struggle.”

Silicon Valley residents in particular are leaving in droves – more so than any other part of the state. Nearby San Mateo County which is home to Facebook came in Second, while Los Angeles County came in third.

They’re looking for affordability and not finding it in Santa Clara County,” said Danielle Hale, chief economist for realtor.com.

It’s not just housing prices driving the exodus, of course. Punitive taxes – more than twice as much as some other states, are eating away at disposable income. Nearby Arizona’s income tax rate is 4.54% vs. California’s 9.3%, while the new tax bill may accelerate the exodus.

As Michael Snyder of the Economic Collapse Blog pointed out in May…

Reasons for the mass exodus include rising crime, the worst traffic in the western world, a growing homelessness epidemic, wildfires, earthquakes and crazy politicians that do some of the stupidest things imaginable.  But for most families, the decision to leave California comes down to one basic factor…

Money.

Mass Exodus

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As you may or may not be aware, we’ve mentioned the flood of various types of Californians fleeing the state for various reasons; be it wealthy families who want to keep more of their income safe from the tax man, or poor residents leaving the Golden State because they are being crushed by the high cost of living. 

To that end, the Orange County Register notes a significant out migration of people in their child-raising years – as the largest group leaving the state, some 28%, are those aged 35 to 44. 

According to IRS data from 2015-2016, the latest available, roughly half of those leaving the state make less than $50,000 per year, while roughly 25% of those leaving make over $100,000. 

What did the OC register conclude?

Thanks to unaffordable housing, California’s moderate wage earners are going to have to leave the state, while only the wealthy and the impoverished residents will remain. 

But the big enchilada in California — by far the largest source of distortion in living costs — is housing. Over 90 percent of the difference in costs between California’s coastal metropolises and the country derives from housing. Coastal California is affordable for roughly 15 percent of residents, down from 30 percent in 2000 and 30 percent in the interior, from nearly 60 percent in 2000. In the country as a whole, affordability hovers at roughly 60 percent.

***

Over time these factors — along with prospects of reduced immigration — will impact severely the state’s future. California is already seeing its population aged 6 to 17 decline. This reflects a continued drop in fertility in comparison to less regulated, and less costly, states such as Utah, Texas and Tennessee. These areas are generally those experiencing the biggest surge in millennial populations. –OC Register

And according to ULI, 74% of California millennials are considering an exodus

Where to? 

As we noted in June, these are the top 10 California counties that people are leaving, and where they’re headed (via the Mercury News): 

1. Santa Clara County

Out of state destinations: Arizona, Nevada, Texas and Idaho

In state destinations: Alameda, Sacramento, San Joaquin, Santa Cruz and Placer counties

2. San Mateo County

Out of state destinations: Arizona, Nevada, Texas and Washington

In state destinations: Alameda, Contra Costa, Santa Clara, Sacramento, and San Francisco counties

3. Los Angeles County

Out of state destinations: Nevada, Arizona, and Idaho

In state destinations: San Bernardino, Riverside, Ventura and Kern counties

4. Napa County

Out of state destinations: Arizona, Idaho, Nevada, Florida and Oregon

In state destinations: Solano, Sonoma, Sacramento, Lake and El Dorado counties

5. Monterey County

Out of state destinations: Arizona, Nevada, and Idaho

In state destinations: San Luis Obispo, Fresno, Santa Cruz, Sacramento and San Diego counties

6. Alameda County

Out of state destinations: Arizona, Nevada, Idaho, and Hawaii.

In state destinations: Contra Costa, San Joaquin, Sacramento, Placer, and El Dorado counties

7. Marin County

Out of state destinations: Nevada, Arizona, Oregon and Idaho.

In state destinations: Sonoma, Contra Costa, Solano and San Francisco counties

8. Orange County

Out of state destinations: Arizona, Nevada and Idaho

In state destinations: Riverside, Los Angeles, San Bernardino, San Diego and San Luis Obispo

9. Santa Barbara County

Out of state destinations: Arizona, Nevada and Idaho.

In state destinations: San Luis Obispo, Ventura, Los Angeles, Riverside and Kern counties

10. San Diego County

Out of state destinations: Arizona and Nevada

In state destinations: Riverside, San Bernardino, Imperial, Orange County and Los Angeles

Source: ZeroHedge