The latest Bureau of the Census estimates are out and the news for Chicago is not good.
According to Census data released in March, the Chicago metropolitan area lost 4.5 percent of its population to internal migration between 2000 and 2006. This is more than 400,000 people. Only San Jose, San Francisco, Los Angeles, Boston, and New York lost a larger share of their populations (excluding New Orleans for obvious reasons).
San Jose, San Francisco, Los Angeles, Boston, and New York? This should come as a surprise. All were growing strong in the ’90s, but now people are rushing to get away.
Even more surprising, while Detroit’s Wayne County lost more overall population than Cook County, the Detroit area actually lost less of its population to internal out-migration than did Chicago. Indeed, perennial rust-belt losers Cleveland, Buffalo, and Pittsburgh lost less of their population than the Chicago area, while Philadelphia lost only a quarter as much.
What has happened? In a word, housing has become so unaffordable that many of the nation’s growing metropolitan areas are now driving away residents, like young people and those seeking to “cash-in” on the windfall profits from extraordinary house price appreciation.
The result is an internal out-migration of 3,500,000 people from the seven most expensive markets (San Jose, San Francisco, Los Angeles, Boston, New York, Miami and San Diego) in just five years. Where are they going? Generally, to less-expensive markets such as Phoenix and Las Vegas, the South, and smaller Midwestern markets such as Indianapolis, Kansas City, and Columbus.
Data indicate that, generally, the most expensive housing markets are experiencing the largest internal migration losses. We can measure housing affordability by comparing the median house price to the median household income and getting a ratio called the “median multiple.” A higher median multiple means less affordability.
For instance, the median multiple in expensive markets such as Los Angeles, San Diego, and San Francisco is more than 10.0. In many of the growing markets, such as Atlanta, Houston, and Dallas-Fort Worth, affordability remains near or below the historic norm of 3.0.
In Chicago, the multiple now stands at 4.5, up 40 percent from 10 years ago. There may be many reasons people are leaving the Chicago area, but surely reduced housing affordability is among them.
Why are housing costs increasing? Generally, the most expensive markets have excessively strict controls on land usage and are burdened by extreme strategies of “smart growth.” They use urban growth boundaries and excessive impact fees, or large lot zoning on the urban fringe, to control so-called “sprawl.” But they end up leaving nothing available for low-priced development. In suburban Chicago, these strategies are under discussion and large lot zoning is already taking its toll.
In Atlanta, Dallas-Fort Worth, Houston, and the other affordable markets, these policies have been avoided and housing affordability has remained at historic norms.
There is no reason why Chicago should not seize this historic opportunity for population and economic growth, as the land use policies in other areas drive people away. However, it will have to avoid the “smart growth” strategies that have been disastrous in San Francisco, San Diego, Boston, and the other highly unaffordable markets.
Wendell Cox ([email protected]) is principal of Wendell Cox Consultancy, an international public policy firm. He serves as a visiting professor at the Conservatoire National des Arts et Metiers and is co-author of the Demographia International Housing Affordability Survey.
(Data available online at (http://www.demographia.com/db-intmigra-msa.pdf)