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High Housing Costs Drive Exodus to Exurbs

August 16, 2019

Smaller cities in the United States are growing much more quickly than large ones, reversing a trend earlier in the 2010-2019 decade.

Smaller cities in the United States are growing much more quickly than large ones, reversing a trend from earlier in the current decade.

The reason? High housing costs in the nation’s big cities.

From 2017 to 2018, the nation’s largest cities grew by 326,000 residents, “less than half the number earlier in the decade,” Stateline, a news service of the Pew Charitable Trusts, reported on June 13.

Conversely, towns with populations under 10,000 grew more quickly than “earlier in the decade” of 2010-2019, attracting a net gain of more than 142,000 people in 2018, based on analysis of U.S. Census estimates, Stateline reports.

The biggest reason for this retreat is the high cost of housing in big cities.

Individuals in several demographic groups, including retirees and working individuals, are fleeing big cities to seek affordable housing elsewhere.

Major cities such as Los Angeles, San Francisco, and New York have numerous residents departing to outlying suburbs or exurbs even though they continue to work in the city itself. Major California metropolises are bringing in a flood of tech workers who then have trouble affording a home and whose presence drives up housing prices for all.

‘Jobs Need Beds’

Areas of low unemployment and high job growth must allow the housing stock to expand in sync with the local job market, Stateline reports Adam Fowler, research director at Beacon Economics, a Los Angeles consulting firm, who studied the gap between jobs and housing last year, as saying.

“Jobs need beds,” Fowler told Stateline. “We’ve had an influx of well-paid information workers, but we haven’t built housing for them.”

San Jose is a good example of a high-cost city with high employment. In 1974, it instituted an urban-growth boundary—a regional mandate that attempts to control urban sprawl by restricting development outside the city’s urban core. Before 1974, San Jose was one of the fastest-growing cities in the country. Now it is one of the slowest-growing.

Increasing Demand Without Supply

Although an inrush of new residents can challenge a city to provide necessary housing, government policies that prevent the housing market from expanding as necessary are mainly responsible for the problems, says Lawrence H. White, an economics professor at George Mason University.

“Policies that restrict housing supply, like zoning that restricts density or rules hostile to landlords, reduce supply and raise prices,” White said. “Policies that attract residents increase demand and raise prices.”

Land-Use Controls

With policies such as urban-growth boundaries and the costs of permits, city officials have a hand in controlling housing prices. Urban affairs experts have found areas with lighter zoning regulations generally remain more affordable.

More-expensive areas are generally those that institute harmful policies, while other places remain more affordable by not regulating land use so heavily, says Randal O’Toole, a senior fellow at the Cato Institute and policy advisor to The Heartland Institute, which publishes Budget & Tax News.

“California, Hawaii, Oregon, and Washington need to repeal state land-use laws,” O’Toole said. “The Florida legislature repealed the [state’s] land-use mandate, which helped, but didn’t repeal the authority to keep land-use regulation. So some cities in Florida have become more affordable but others remain unaffordable.”

Statewide policies that allow growth are best, says O’Toole.

“Texas is the ideal,” O’Toole said. “Counties in Texas are not allowed to zone or otherwise regulate land uses in unincorporated areas, except to protect riparian areas. That’s why Texas remains affordable.”

Big Yard or Cramped Condo?

The slowing of growth in the nation’s largest metropolitan areas is a recent trend.

The Stateline report says many of the cities that aren’t growing quickly today experienced much more rapid growth earlier in the decade. Whereas the biggest cities grew by a collective 326,000 people from 2017-2018, cities with populations between 10,000 and 50,000 gained 421,000 new residents.

This trend can easily be altered by policy, but big cities have continued to institute the laws that are causing people to leave, says O’Toole.

“Given a choice between a $200,000, 2,200-square-foot home with a large yard—which is easily found in Texas—and a $300,000, 1,100-square-foot condo with no yard—which is cheap for San Jose but might be typical for Portland and Seattle—nearly everyone would choose the former,” O’Toole said. “These policies deny people such choices.”

Owen Macaulay (omacaulay@hillsdale.edu) writes from Hillsdale, Michigan.

 

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