Are the High Fliers Pricing Themselves out of the Market: The Impact of Housing Cost on Domestic Migration Rates in U.S. Metropolitan Areas Urban Affairs.

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Presentation transcript:

Are the High Fliers Pricing Themselves out of the Market: The Impact of Housing Cost on Domestic Migration Rates in U.S. Metropolitan Areas Urban Affairs Association Meetings Chicago, Illinois March 4-7, 2009 Barry Bluestone Northeastern University Mary Huff Stevenson University of Massachusetts Boston Russell Williams Wheaton College

Boston Monthly Housing$1,266 Monthly Food$ 587 Monthly Child Care $1,298 Monthly Transportation$ 321 Monthly Health Care $ 592 Monthly Other Necessity$ 500 Monthly Taxes$ 824 Monthly Total$5,388 Annual Total $64,656 Raleigh-Durham- Chapel Hill Monthly Housing$ 779 Monthly Food$ 587 Monthly Child Care $ 866 Monthly Transportation$ 358 Monthly Health Care $ 368 Monthly Other Necessity$ 369 Monthly Taxes$ 350 Monthly Total$3,677 Annual Total $44,124 A Tale of Two Cities: The Cost of Living Challenge Source: Economic Policy Institute, “Family Budget Calculator, 2005”

Boston vs. Raleigh Net Domestic Migration ( ) Employment Growth ( ) Boston % -2.0 % Raleigh % %

Housing Costs – Top 10 MSAs 1. Honolulu, HI 2. San Francisco-Oakland-Fremont, CA 3. Santa Cruz-Watsonville, CA 4. Oxnard-Thousand Oaks-Ventura, CA 5. San Diego-Carlsbad-San Marcos, CA 6. Boston-Cambridge-Quincy, MA-NH 7. Santa Barbara-Santa Maria-Goleta, CA 8. Washington-Arlington-Alexandria, DC-VA-MD-WV 9. New York-Northern New Jersey-Long Island, NY-NJ- PA 10. Los Angeles-Long Beach-Santa Ana, CA

A Similar Pattern for Employment Growth  Generally, employment has expanded faster in higher housing cost metro areas  But … not true in the most expensive MSAs

Net Domestic Migration Regression Monthly Housing Cost (4.78) Monthly Housing Cost Squared (5.48) Employment Growth Rate ( ) (13.69) Days Under 32 Degrees (1.77) N = 347 Adjusted R-Sq =.444

Employment Growth Regression Monthly Housing Cost (3.46) Monthly Housing Cost Squared (2.77) Days Over 90 Degrees (9.13) Violent Crime Rate (3.92) N = 347 Adjusted R-Sq =.219

Net Migration Simulation  Boston MSA Actual Net Domestic Migration Rate: -6.0% Estimated assuming 10% Lower Cost of Housing: -3.4% 43% decline in out-migration rate Change in Net Domestic Migration Rate if +10% Employment Growth Rate: - 0.1%

A Change in Statistical Regime  Up through the 9 th Decile, in-migration and employment growth contribute to higher housing cost as housing demand outstrips housing supply  But once you reach the top decile, the statistical regime abruptly changes  Now home costs drive migration and employment patterns … contributing to population and job loss.

Conclusion  The highest cost metro areas, failing in the recent past to build adequate housing stock to meet rising demand, are now pricing themselves out of the market for people and business investment