According to Romem, between 2005 and 2016, those moving into the San Francisco area had median household incomes averaging $12,639 a year more than the households of the families moving out, $70,015 to $57,376.
Conversely, in the struggling Syracuse metropolitan area (Clinton 53.9 percent, Trump 40.1 percent), families moving in between 2005 and 2016 had median household incomes of $35,219 — $7,229 less than the median income of the families moving out of the region, $42,448.
It’s a long essay, worth reading in its entirety. Edsall’s focus is on the evolution of the political coalition that makes up the Democratic Party. But I find the economic phenomenon interesting. The data support the Handle Hypothesis that urbanization has become a winners-take-most game. The article by Issi Romem that Edsall refers to is also worth reading. Romem writes,
Why do the expensive coastal metros exhibit positive income sorting? These metros are expensive because they have restricted their supply of new housing even as they continue to generate strong demand for it.
Kevin Erdmann and many others have been saying this for quite some time.
Related: Pew reports,
In 2001, 13 percentage points separated the shares of white and African-American renter households that were burdened: 26 and 39 percent, respectively. . .By 2015, the share of African-American-led renter households that were burdened had risen to 46 percent
Rent-burdened is defined as spending more than 30 percent of a household’s income on rent. Pointer from Tyler Cowen.
I think that the political threat to the Democratic Party is minimal. Group identity seems to overcome anything. The Democrats can be anti-Israel and still get most of the Jewish vote. Their policies make housing less affordable and drive African-Americans out of Washington, D.C. or San Francisco, but they still get most of the black vote.
Faster pit boss technology allows dense set of stable queues, more complex value added chains.
Cell phone and on line order book, coupled with faster payment systems is n pit boss tech.. All this allows huge warehouse with complex segmentation of goods within.
We’ve simply swapped class-segregation for racial-segregation.
Edsall writes “Establishing that majority in a coherent political coalition is the only way in which the economic interests of those in the bottom half of the income distribution will be effectively addressed.”
Do the bottom half have shared economic interests? Are these interests actually different than the interests of the upper half? If so, how is government going to effectively address these interests? Don’t people move back and forth between upper and lower over their lifetime? What new program for the poor could be created that wouldn’t duplicate a half dozen existing programs? How many times can you increase the EITC? How much more money do we want to pour into ineffectual school improvement programs?
In Three Languages terms, Edsall uses the oppressor-oppressed axis to create a fairy tale in which an oppressive rich class uses government to benefit itself at the expense of the oppressed poor. Sadly, it is a timeless fairy tale to which we are irresistably drawn, its false promise never held to account, shielded by the alibis of politics and war. It is not surprising that Jason Collins can keep up with the news without the media, the media never changes.
There is a huge conflict between the working poor/middle class and the true lumpen (this often equates to brown vs white/asian, but that isn’t the case everywhere). When law and order break down the lumpen benefit, the working class pays, and professionals and rich buy their way out. Same with breakdown in social mores, breakdown in family formation, etc. The pattern is clear. The lumpen are bought off with welfare and the UMC+ buy their way out of the damage with their higher salaries. Those that don’t have high IQs but want to rise above an animalistic state get nothing.
Edsall types can’t understand the main problem that the working poor have is not being able to afford to rent to move away from the dregs of society. If you give more to the dregs that actually makes it harder to separate themselves from them.
There’s no way to help people if they tend to have common preferences and improving their welfare mostly depends on them becomming richer than the other people who would get the same help.
This is one of the fundamental problems with the “just give people money and let them spend it how they like” approach. And the kind of anti-market intervention required for “dilution” is economically and politically prohibitive and counterproductive, to put it mildly.
The alternative then is to try to address the problem directly, that is, to ensure that low income neighborhoods and schools are reliably orderly, plesant, and safe enough that they don’t generate such a desire for exodus, (though, as soon as a neighborhood gets that way, without additional intervention, it will no longer be affordable for low income workers unless it is far from the city center, as is the case for most global big cities.)
Suffice it to say that the current custodians of our society’s commanding heights have zero stomach or ideological inclination to do what is necessary to acheive that. Which makes the “just give people money” tactic all the more tempting, since it seems like something which could “work” without having to get into the messy business of fixing a broken underclass culture.
Interesting post.
End property zoning, and go to property taxes as main source of government revenues, and away from taxes on labor and income.
I think that the political threat to the Democratic Party is minimal. Group identity seems to overcome anything.
No there are threats here as an California I would vote for Republican state representatives.
1) Please state where the Democratic Party is anti-Israel? I have become agnostic on Israel and I figure they are going to have to do something with Palestine at some point. Whether it is two-state or Palestine integrated is going to happen. It feels a lot like Britian and Ireland from the 1980s in which both sides have good societies but not (Anyway, I believe Benjamin Netanyahu siding with Republicans against Obama was not a good long term although I know the Democratic peaceniks don’t listen Netanyahu on Iran because his goal is to get the US to start a war with Iran like he whispered back in 2002 about Iraq.)
2) It is reasonable for blaming progressives for some of the city regulations but in SoCal all the worst city regulations were developed during the Republican years of the 1980s. (Irvine, Malibu, where they were Reagan country.) So it is reasonable to not to blame one side here. Anyway, nobody has shown why city deregulation is going to lower rents any more than 10%. It is a good movement led progressive like Matt Yglesias but can we be realistic on the potential here? Also, in terms of long time African-American home-owners in old gang cities (Oakland, Compton, etc.) have seen a huge asset windfall the last 25 years. Also please read Kevin Drum opinion on this and realize the citizens don’t like more TRAFFIC!
Housing restrictions are overrated. Not that they don’t exist but they are local and there are many, many localities, none of which find it in their interest to appeal to haphazard development. Rather such restrictions add to the value of development and increase their desirability. It is somewhat less in exurbs, but that is because lower densities allow for that.
Higher growth areas are more expensive because growth becomes capitalized into the price; they aren’t separate. As investments, they have to compete with other investments, but there is no investment value without growth. At best it is a store of value elsewhere, or not even that.
Interesting articles.
Here is a post I did a while back that has some analysis similar to Romem’s. It seems to point to a connection between low housing starts and extra out-migration of households with low incomes.
http://idiosyncraticwhisk.blogspot.com/2018/01/housing-part-279-building-homes-helps.html
>Why do the expensive coastal metros exhibit positive income sorting?
I can offer some insight on this, as I’m a high earning, relatively young white male living in one of the named expensive coastal cities (aka “part of the problem” or “a gentrifier”). I have the resources and options to live in any of the most desirable places on this earth, and I choose a big, dirty, expensive city because it’s full of people like me. When you live in an ‘economically walled garden’ like this, everyone you meet is smart, interesting, and successful in similar ways to myself. There are better professional opportunities, better social opportunities, better dating opportunities, etc. All of this is because, not despite, the rising costs.
What previously was contained to relatively small affluent suburbs like Bel Air or Westchester is now playing out on massive scale in the metros.
There’s a lot of truth in that with which I can personally sympathize, but it’s not the only thing going on.
As usual with any complex phenomenon, there are several drivers of what is going on with urbanization and big city rents, with feedbacks between them, and so it is challenging to tease out the relative contributions of each factor, and hard to resist the temptation to get behind the “One True Cause” when it happens to imply policy reforms which line up with one’s political preferences.
Here are three big factors for urban rents:
1. Fundamental changes in the allocation of tasks in the labor market due to an economic transition determined by recent technological developments. Specifically, those which have caused huge changes in the relative labor productivity between output of stuff and services.. In other words, humans doing what only humans can do means most of them – especially those who earn higher incomes – have to do it near other humans, and the spiderweb of “proximate interactions” means that must happen in a few, centralized big cities.
2. Urban amenities, including social benefits. Many people, especially young people, like to live in big cities and will pay extra to move to them because (inter alia) 2.a) living in big cities is higher status, cool, prestigious, impressive, good for showing off, etc., 2.b) that’s where most of the other smart, talented, interesting, high status, cool, and rich people live, 2.c) there are more opportunities to socially interact with those people, 2.d) there are more opportunities for everything, jobs, niche minority hobbies and interests, etc. which includes 2.e) many more consumption options, to include the additional pleasure (for some people) of there always being something left to explore an discover and try, etc.
3. State anti-market interventions, most especially zoning and other restrictive regulations on building, but also rent-control (which paradoxically raises rents on uncontrolled properties, “historic” building preservation rules, environmental rules, and various forms of subsidies in the “restrict supply, subsidize demand” style of governance.
If you are trying to address rents, it is probably just impossible to do anything about 1, and most big city governments are apparently already doing everything they can get away with to attenuate the effects of 2 by governing in such an incompetent and predatory way so as to reduce the quality of urban living far below potential. The flip side of that coin is that better and cheaper urban government would mean even higher rents.
So, even though the political obstacles are likely insurmountable anytime soon (see, e.g., the latest results in California) it’s no surprise that most policy-community attention – and especially that of libertarians – has turned to 3, especially with regards to moderating the zoning restricitons constricting supply. I can only hope that recent political failures provide inspiration for these advocated to engage in some more creativity regarding their proposals, instead of doubling down on “get rid of the rules,” which terrifies the incumbents one needs to get on board with any changes. For example, one crazy idea could be to give any seller of property in an newly upzoned neighborhood the right to the entire top floor of any new construction as their own luxury penthouse, and also to the money required to rent a place reasonably similar to their old home until they can move in. They could either decide to take possession or sell all or part of these rights back to the developer.
That might provide enough of an attractive “lifestyle and neighbors stability” upside to get neighborhood residents on board with upzoning. There are countless possibilities, but the point is that it’s time to start inventing and entertaining some of them instead of fighting in the same trenches forever.
It’s also worth noting that since everyone is looking at things in the same way, maybe there is some intellectual profit to be made by looking at it in the opposite way (this was a common trick deployed by Chesterton and Marx, which you can read him use several times in Writings of the Young Marx on Philosophy and Society.)
So, for example, while everybody is asking “Why are the rents so high?” maybe one should instead try to ask, “Why are the rent so low?” If city living is so indispensible or important or enjoyable, then why don’t rents go even higher? Why is the market equilibrium where it is? We don’t just want to know what propping prices up, we also want to know what’s holding them down. (One can ask the same questions for taxes, health care, and education – the Neo-Ricardian sectors.)
Well the obvious answer is affordability. People can only make so much money, so they can only afford so much rent. The rent price is determined by the balance the typical resident is willing (and legally able) to strike between shelter and the rest of their lifestyle given the constraint of their incomes.
But think about what that means. The implication is that once a consumer’s threshold for lifestyle is met, that opens up the rest of their income to bid up the prices of the goods and services they consume of a more zero-sum or positional character, where supply and demand are more inelastic. And with land, one is not just bidding up “shelter” but also the quality and status of the neighbors.
Kevin Drum recently made this point, analogizing to traffic (he could have used it more abstractly and included ‘bandwidth’) and based on intuitions he articulated in a somewhat clumsy way that has led to a lot of criticism, especially by libertarian economists. But few of those critics took the “Jevons paradox” of induced / latent demand issue seriously enough to perform any analysis rigorous enough to dispose of the issue.
That is, sure, if you add supply, there will be new maginal immigrants to the city deriving from pent-up demand. But at the end of the day, it’s perfectly plausible to expect everybody to bid up desirable properties to the limit of lifestyle affordability again, which means there is very little “relief” for existing incumbents in the final analysis, and very little reason to get on board with any reform proposal.
Furthermore, like Drum pointed out, many cities, especially in the US, are especially bad at providing for what I’ve called the “conservation of infrastructural adequacy”, which means a likely decrease in the quality of urban living due to greatly increased congestion. Yes, one can then play whack-a-mole by imposing congestion pricing, but the point is to highlight the increased congestion cost, one way ot the other, because it’s too difficult and expensive for governments to add capacity in proportion to pent-up demand for more urbanization.
Jews and Gays in Europe now vote conservative/nationalistic for survival reasons. The anti-semitism of the left will eventually drive Jews in America to the right. Orthodox joke (q) What is the difference between Trump and Jews in the Democratic party? (A) Trump’s grandchildren are Jewish. Coastal sorting may change with the new tax code. Data already suggests that much of the “high tech” industry is moving out of the coastal areas. The black vote has swung historically from republican to democrat, no reason it can not swing back. Do not assume today’s trends will continue in a straight line.