There’s an Exodus From the ‘Star Cities,’ and I Have Good News and Bad News

When it comes to the fate of big cities in the wake of the Covid-19 pandemic, there are two sets of overlapping economic and political consequences, but they are not necessarily what you might expect.

Declining tax revenues, business closures, spiking rates of violent crime and an exodus to smaller communities have left major urban centers anxious about surviving the pandemic’s aftermath and returning to a new normal.

But all is not lost.

In a paper published earlier this month, “America’s Post-Pandemic Geography, two urbanists who come from very different political perspectives, Richard Florida, a professor at the University of Toronto, and Joel Kotkin, a professor at Chapman University, argue:

Any shift away from superstar cities may augur a long-overdue and much-needed geographic recalibration of America’s innovation economy. High-tech industries have come to be massively concentrated — some would say overconcentrated — in coastal elite cities and tech hubs. The San Francisco Bay Area and the Acela Corridor (spanning Boston, New York, and Washington, D.C.) have accounted for about three-quarters of all venture-capital investment in high-tech start-ups. In the decade and a half leading up to the pandemic, more than 90 percent of employment growth in America’s innovation economy was concentrated in just five major coastal metros: San Francisco, San Jose, Seattle, San Diego, and Boston, according to the Brookings Institution.

In addition, Florida and Kotkin write:

The current shift to remote work makes geographic rebalancing of these industries more feasible, and a number of leading big tech companies have openly embraced it. Such a rebalancing might help not only smaller cities develop more robust economies but also take some pressure off the housing and real-estate markets of superstar cities and tech hubs, making them more affordable.

In an email, Florida argued that a key motivating force driving many of the recent departures from big cities was the desire to be away from the pandemic, as well as from pandemic restraints imposed by local governments:

More affluent people, especially risk-oriented entrepreneurial types are fleeing to less restrictive more open environments, where they choose to undertake their own risks and, if they have kids, to send them to school.

There is also political fallout from the nation’s changing demography.

Jonathan Rodden, a political scientist at Stanford and the author of “Why Cities Lose: The Deep Roots of the Urban-Rural Political Divide,” explained in an email how the geographic dispersion of Democratic voters may help slowly shift Republican and competitive districts in a leftward direction:

Even before 2020, there was already a strong correlation between net county-level in-migration and increasing Democratic vote share. In 2020, this relationship was incredibly strong. All around the country, counties that experienced in-migration saw increases in Democratic vote share — in some cases very large increases — and places experiencing out-migration saw increases in the Republican vote share. These in-migration counties that trended Democratic were mostly suburban, and the out-migration counties that moved toward the Republicans were both urban core and rural counties.

For decades, Rodden continued,

Democrats have been excessively concentrated in urban centers, which makes it difficult for them to transform their votes into commensurate legislative seats. But as cities lose population, most of the growing suburban counties are either red counties that are trending purple, or purple counties that are trending blue, and very few are overwhelmingly Democratic.

Democratic suburban gains were already evident in the 2018 and 2020 elections in states like Georgia, Arizona, Texas and North Carolina.

At the same time, the movement of Democratic voters from urban centers is very likely to moderate the agenda-setting strength of progressive urban voters. This process will lessen an ideological problem that plagued Democratic congressional candidates.

In “Why Cities Lose,” Rodden wrote:

Voters in the urban core congressional districts are ideologically quite distinct from the rest of the country, and quite far away from the median district. And the most extremely conservative rural districts are actually not very far away from the pivotal districts around the median.

Rodden continues:

In most U.S. states then, urban districts are far more liberal than the rest of the state. As a result, Democrats face a difficult challenge in trying to manage their statewide party reputation. If it comes to be dominated by urban incumbents, they will find it hard to compete in the pivotal districts.

In his email, Rodden argued that because Republicans control congressional redistricting in many more states than Democrats do, Democrats may not make immediate gains in the House as a result of these population shifts. But, he noted, as these trends continue, districts gerrymandered at the beginning of the decade may shift in a more progressive direction over time:

Republican map-drawers will be working with a rapidly moving target, and the task of making projections for elections 6 or 8 years into the future in suburban and exurban areas might be difficult. The future political orientation of suburban areas depends, in part, on choices that will be made by both parties in the years ahead. Gerrymandering takes very little effort when your opponents are already geographically packed. As they spread out and mingle with your supporters, the job becomes more challenging.

John Austin, director of the Michigan Economic Center, pointed out in an email that “even before the pandemic, there were a growing number of exceptions to the seemingly inexorable march of a tech and knowledge economy to consolidate in handfuls of superstar global cities.” He cited as especially attractive those smaller cities with research universities, including Iowa City, Iowa; Ann Arbor, Mich.; State College, Pa.; and South Bend, Ind.

“Many techies realize they can flee the costs, congestion and craziness of the coasts (like the Bay Area),” Austin said,

and find a lot of people like them and robust culture and diverse community in the Nashvilles scattered across the county. This kind of tech-talent immigration only happens to places these folks perceive to be a place with lots of people like them and a rich culture mix — coastal techies now know Phoenix and Boulder fit the bill — but this is also a huge opportunity for places like Madison and Ann Arbor and the Marquettes and the Ashevilles, which do have a rich and diverse talent base, tech-scene, food and music and all that.

Austin believes that the movement of high-tech workers to smaller, redder states will benefit the Democratic Party.

As these areas gain knowledge workers, Austin wrote, they will see local politics

evolve to be more progressive, and better inoculated against the appeal of right wing populist demagogues like Trump. Local residents will become more optimistic and forward looking, not responding to the siren song of nationalism, nativism and pullback from the international order. Newcomers leaven the polity. This is clearly what we see in places like Grand Rapids in West Michigan and other smaller tier former manufacturing centers in the Midwest.

Once a rock-ribbed Republican county, Grand Rapid’s Kent County voted for Biden over Trump 51.9 percent to 45 percent.

In their March 2021 paper, “From L.A. to Boise: How Migration Has Changed During the Covid-19 Pandemic,” Peter Haslag and Daniel Weagley, professors at Vanderbilt and Georgia Tech, identified the highest percentage of movers from one state to another, topped by California residents going to Texas, then New York to Florida and Illinois to Florida.

The geographic trends are striking. Of the top 20, 19 were from blue states to red states.

Last year, Manhattan’s population fell by 20,337, the largest drop in 30 years, according to data compiled by William Frey, a Brookings senior fellow.

Over the three decades from 1990 to 2020, Frey found that in large metropolitan counties, the population of inner and outer suburbs grew twice as much, at 38.7 million, as that of center cities, at 18.8 million, as shown in the accompanying graphic.

Four scholars from N.Y.U. and Columbia — Arpit Gupta, Vrinda Mittal, Jonas Peeters and Stijn Van Nieuwerburgh — studied real estate sales and rental trends in their April 2021 paper, “Flattening the Curve: Pandemic-Induced Revaluation of Urban Real Estate,” to determine population shifts before and during the pandemic.

They found a Covid-driven reversal in the trend toward ever “more concentrated economic activity in a handful of dense urban areas” with the shifts “related to practices around working from home, suggesting that they may persist to the extent that employers allow remote working practices beyond the pandemic.”

While the ability to work remotely gives workers access to “the larger and more elastic housing stock at the periphery of cities, thereby alleviating rent burden,” Gupta and his co-authors write,

the results also point to potential problems for local government finances in the wake of the pandemic. Urban centers may confront dwindling populations and lower tax revenue from property and sales in the short and medium run. More dispersed economic activity may offer greater opportunities for areas previously left behind, but potentially at the cost of agglomeration economies built in urban areas.

In an email, Van Nieuwerburgh elaborated. “There are serious headwinds for our ‘gateway’ cities like N.Y.C., S.F., D.C., Boston,” he wrote, noting that he could “imagine how work from home may lead to a 20 percent reduction in demand for downtown office space.” This, in turn, “is a big story because banks have lent billions against office buildings, and for small and medium-sized banks (and maybe even for some big ones) this exposure is material.”

Who will the winners and losers be?

Van Nieuwerburgh’s answer:

Winners: the low-tax cities in the south and west (like Austin, Atlanta, Orlando, Miami); losers: the high-tax cities with high downtown office vacancy rates.

I asked Gupta a series of follow-up questions and he replied by email that “cities with a lot of working from home, and with high prices — Seattle, S.F., N.Y.C. — are going to be the most affected” and there will be “increasing migration of people from blue states to red and purple ones, which would make states like Georgia even more competitive.” He added: “Suburban areas in the vicinity of large cities, and already fast-growing Sunbelt and Mountain West cities, seem like the biggest winners. Urban cores and the Midwest seem like some of the losers.”

Nicholas Bloom, an economist at Stanford, has a decidedly pessimistic outlook. He told the City Journal in an April 2020 interview, “I fear that the prominence of the city, and particularly city centers, will decline.”

In recent decades, he continued,

the city has flourished, so that now central New York and San Francisco are the most expensive places in the U.S. to live. I worry that this has ended for two reasons. First, the pandemic has made us much more aware of the need to reduce density — particularly indoor density. That means avoiding the subway, elevators, shared offices, and communal living. Second, working from home is here to stay, and with it, the need to live close to the office will diminish. I doubt that many firms will allow people to work from home for five days a week, but two or three days a week will be common. And many of us will wonder: if we need to be in the office for only half the week, why not live further out, where housing is cheaper?

In an April 2021 paper, “Why Working From Home Will Stick,” Bloom and two colleagues, Jose Maria Barrero, a professor at Instituto Tecnológico Autónomo de México, and Steven J. Davis, a professor at the University of Chicago, argue that the Covid pandemic has revolutionized work, with remote employees quadrupling from roughly 5 percent to roughly 20 percent of the work force. The consequences will be felt everywhere, especially in big cities, they write: “The shift to WFH will also have highly uneven geographic effects, diminishing the fortunes of cities like San Francisco with high rates of inward commuting.” The shift to working from home “will lower expenditures on meals, entertainment, personal services, and shopping in major cities by 5 to 10 percent of prepandemic overall spending.”

In a detailed set of analyses for New York City and San Francisco, with San Francisco data appearing in parentheses, Bloom and his colleagues report from a series of monthly surveys they conducted that the result is a 13 percent drop in consumer spending in New York and 4.6 percent drop in San Francisco.

The net benefits of the shift will, in turn, “flow mainly to the highly educated and well paid,” according to the four authors, and “will yield larger benefits (as a percent of earnings) for men, the college-educated, those with children and persons with greater earnings.” The earnings relationship, they note, “is very steep.”

Patrick Sharkey, a professor of sociology at Princeton, pointed to an additional threat to urban life: the surge in violent crime:

The very idea of cities as places where collective life is prioritized, where people come together in shared spaces like parks, playgrounds, sidewalks, front stoops, subways, cafes, stadiums and theaters, begins to break down when public spaces carry the threat of violence.

There is, Sharkey continued,

strong evidence that rising violence contributed to out-migration from central cities in the era of extreme urban violence from the late 1960s through the 1980s; and, alternatively, that the decline in violence from the early 1990s to the mid-2010s brought people back into central cities.

If violence keeps rising (in New York, for example, shootings rose 95 percent over 2020) and if government fails to intervene, Sharkey warned, “those who have the resources to leave central cities will do so.”

What can we anticipate?

The lack of consensus on this question is reflected in individual essays that Florida and Kotkin wrote.

Florida, ever the optimist, wrote in June 2020:

Not only are cities on the upswing, we are in the early stages of a new wave of urban policy innovation, which is occurring from the bottom up in cities, our true laboratories of democracy. Even before the current crises, cities were beginning to address the mounting challenges of racial and class division, inequality, police reform and worsening housing burdens.

Kotkin, ever the pessimist, wrote in March 2021:

Today’s urban promise is, however, vastly different — not only in New York, but San Francisco and Los Angeles, London and Paris. No longer cities of aspiration, they are increasingly defined by an almost feudal hierarchy: the rich live well, protected by private security and served by local coffee shops and trendy clubs. Meanwhile, the working class struggles to pay rent, possesses no demonstrable path to a better life and, as a result, often migrates elsewhere. Crime rates are spiking and homelessness, once an exception, is increasingly widespread. Those very streets once said to be “paved with gold” are now filled with discarded needles, excrement and graffiti.

Take your pick.

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