The Economist - USA (2021-12-18)

22 United States TheEconomistDecember18th 2021

and Jacksonville, Florida.

The places attracting people share com­

mon  features:  relative  affordability,  a

strong  sense  of  community,  amenities

(natural  or  constructed)  and  friendliness

towards  business,  says  Cullum  Clark,  di­

rector  of  the  Bush  Institute­Southern

Methodist  University  Economic  Growth

Initiative. Nearness to nature is attractive,

but so is the ability to bring up a family and

nurture  a  nest­egg.  According  to  Joel  Kot­

kin  of  Chapman  University,  “People  go  to

places  where  they  can  achieve  the  Ameri­

can dream. It’s increasingly difficult to do

that  in  cities  that  created  the  American

dream, like New York,” because of the cost

of living there. 

Housing  costs  are  one  indicator  of

where  people  are  going.  Kalispell,  Monta­

na, has seen the largest increase in proper­

ty values in the country—with the average

home up nearly 50% year­on­year. Second

is Austin, Texas, followed by Boise, Idaho.

Traditional  holiday  spots—including

Bend,  Oregon  and  California’s  Lake  Ta­

hoe—have seen a surge of interest. 

But not every under­the­radar town has

prospered. “It’s very hard to find examples

of  places  that  were  losing  people  or  jobs

but  have  drawn  them  in  during  the  pan­

demic,” says Jed Kolko, chief economist at

Indeed,  a  job­listings  firm.  Some  had  ex­

pected left­behind cities and rural areas to

benefit  from  remote  work  and  migration.

“But the migration data so far suggests that

the  relatively  affordable  places  people

move to are the affordable places they were

already going,” says Mr Kolko.

The  pull  of  suburbs  has  been  observed

for  more  than  half  a  century,  but  covid­19

has  given  it  new  force.  “Urbanising  sub­

urbs”,  as  Mr  Clark  calls  them,  are  gaining

amenities but keeping their characteristic

sprawl. Contrary to the stereotype of iden­

tical  white  homes  with  white  occupants,

today’s suburbs are diverse. Wendell Cox of

Demographia,  a  consultancy,  estimates

that 86% of the population of big metro ar­

eas live in suburbs or exurbs. That includes

90%  of  whites,  83%  of  Hispanics,  81%  of

Asians and 76% of African­Americans.

Four in five of the zip codes that saw the

largest percentage increases in population

since the start of the pandemic were in just

three  states:  Texas,  Florida  and  Arizona.

This underscores the second trend, which

is a shift of people to low­tax states in the

South and West. 

Sunshine  and  low  taxes  are  the  most

obvious reasons. Both Florida and Texas le­

vy  no  state  income  tax,  while  California’s

top rate is 13.3% and New Jersey’s is 10.75%.

Two owners of buildings and housing de­

velopments in the Dallas area estimate that

20%  of  occupants  are  recent  Californian

transplants. But part of the impulse may be

a  reaction  to  covid­19  restrictions.  Unlike

Texas and Florida, which reopened quick­

ly, California insisted on factories and

businessesstayingshut,tothefrustration

ofbosses. Accordingto MrFlorida,“the

reasonpeoplehaveleftcitiesandmovedto

ruralhinterlandsorcitiesintheSouthis

notjusttaxes.It’sthefactthattheycanlive

theirdailylifeandsendkidstoschoolwith

minimalrestrictions.”

Southbysouth-west

Out­of­statebuyers,flushwithcashfrom

selling their expensive homes, have

pusheduppricesinonce­affordablemar­

kets.PricesrosesomuchinFrisco,Texas,

thatScottWarstler,executivedirectorof

operations for the Frisco Independent

SchoolDistrict,decidedtosellhishouse.

Hesolditinthreedays,abovetheasking

price,toa Californianbuyer.Heputinof­

fersonfourrentalsbutwasgazumpedby

peoplewillingtopaya fullyearofrentin

advance,andeventuallyfoundsomewhere

inProsper,thenexttownover.Thesame

outward shift is under way in Denver,

wherehousepriceshavealsospiked,push­

ingpeople 60 milessouthtosmaller,less

congestedColoradoSprings.

Aswitheverythingelse,therichhave

morechoices.The70­oddmilestretchrun­

ningfromMiamitoPalmBeachhasbe­

comea populardestinationforpeopleflee­

ingWallStreetandSiliconValley.InPalm

Beach,atleast tenhomeshave soldfor

$85mormorethisyear.Onefinancierwho

movedfromConnecticuttoFloridareck­

onsthathomepricesonPalmBeachIsland

havetripledsincethestartofcovid­19.He

predictsthatthenextwaveofmillionaire

migrationwillnotbefromthenorth­east

andwestcoasttotheSouth,butfromall 50

statesto PuertoRico,which istheonly

placeonecanliveinAmericaandpayno

taxoncapitalgains.

EvenifnottoPuertoRico,though,the

flowofpeopleandfirmsoutofCalifornia

willprobablycontinue,asstatepoliticians

considerratchetinguptaxesonhigh­earn­

ersandimposingnewregulations.Since

January 114 companieshavemovedtheir

headquartersfromCalifornia,doublethe

numberin2018,accordingtoJosephVran­

ichofSpectrumLocationServices,a relo­

cationconsultant.Businessesofallshapes

andsizesareassessingtheiroptions.The

poster­childforSiliconValleydisruption,

Tesla,recentlymovedfromCaliforniato

Texas.MrVranichsayshewasevencon­

tactedbya wineryinnorthernCalifornia

thatwantstoshiftitsheadquarters:itwill

leavethevinestherebuttakeitsrootless

departments,suchasdistributionandfi­

nance,elsewhere.

Ifthedispersalmeansmoreplaceswill

thrive,thatisagoodthing.“IfI had to

choosebetweenanAmericawherethere

weretwoorthreewealthycitiesortwoor

three hundred, I’d choose two or three

hundred,”saysGlennKelman,thebossof

Redfin,a propertybrokerage.In2005­17a

whopping90%ofemploymentgrowthin

the“innovation”sectorwasconcentrated

injustfivecoastalmetroareas:Boston,San

Diego,SanFrancisco,SanJoseandSeattle.

Innovation in the coming decades will

probablybemorewidelydistributed.

Aswithanydisruption,therewillbe

losersfromthecovidreshuffle.Thelong­

termprospectsofAmerica’sbiggestcities

dependonhow welltheyaremanaged.

Withfewerpeoplecommutinginto cen­

tresbecauseofremotework,shopsmay

notreturn,puttinga greaterburdenonre­

mainingcitydwellerstofundcostlyservic­

essuchas publictransport. Meanwhile,

peopleinsomesuburbsandsmalltowns

mayfindthemselvespricedout.

If the country’s population were ex­

pandingrapidly,whereAmericanschoose

tolivemightmatterless.Butinthepastde­

cadethepopulationhasgrownatthesec­

ond­slowestratesince1790,justslightly

fasterthanduringtheGreatDepression,

accordingtoBillFreyoftheBrookingsIn­

stitution (see chart 2).Immigration has

slowedmarkedly,becauseofthepandemic

andalsobecauseoftighterbordercontrols.

Thismeansthatstatesarecompetingfora

limitedresource:thepeoplethatcomprise

theirtaxbase.Andmanystatesarelosing

thefight.Overthepastdecade, Illinois,

Go South, young man

United States, share of population by region

% of total

Source: William Frey, Brookings Institution

1

40

30

20

10

0

1920 806040 2000 20

West Northeast

South

Midwest

A less populous populace

United States, population increase by decade, %

Source:WilliamFrey,BrookingsInstitution

2

40

30

20

10

0

2010-

2020

1890-

1900

1790-

1800

1840-

    0

1940-

    0