Housing, Mobility, and Opportunity

My family has always been mobile. My mother moved here from the Philippines in the seventies with an associates degree from the lesser known MIT: Mapua Institute of Technology. My father took his mechanical engineering degree from Massachusetts to chase the jobs where they led him: South Africa, San Francisco (where he met my mother), Arizona (where I was born), Nevada, Montana, before finally settling our family in Pittsburgh, where the pay was pretty good and you could buy a big house in the suburbs with good schools on a single income.

In a much smaller way, I've tried to do the same. After deciding small town Pennsylvania wasn't where I wanted to spend my college years, I followed a girl I met at a party out to San Diego to try for a fresh start. With no car and no job lined up, and technically being a college drop-out, I had faith that things would work out. They did, even if the relationship didn't. 

I ended up with an English degree earned in the evenings and, years later, I met Mrs. Done by Forty. Expensive as the city was, we had a good life in San Diego. But in 2009, when Mrs. Done by Forty got an offer to pursue a PhD in Arizona, we decided to move. We left the city and people we loved (and a steady government job, to boot) to roll the dice in a new city, again with no job in hand.

Still, this kind of story is less typical than it used to be. Making big, interstate moves in hopes of finding higher paying work is becoming less common, as this excellent Atlantic article by Alana Semuels notes. Americans aren't as mobile anymore:

"While 3.6 percent of the population moved to a different state between 1952 and 1953, that number had fallen to 2.7 percent between 1992 and 1993, and to 1.5 percent between 2015 and 2016. (The share of people who move at all, even within the same county, has fallen too, from 20 percent in 1947 to 11.2 percent today.)"

Americans have traditionally been willing to move for better work and their migrations have shaped our history: African Americans moving from the south to the midwest and eastern seaboard in the Great Migration, and the dust bowl migration to California in the 1930s that Steinbeck wrote about in The Grapes of Wrath. 

As a people, we've been willing to move our families if there were better opportunities elsewhere. If a worker could potentially double his income in New York or California, the risk of starting over in a new city might be justified. But this migration didn't necessarily hurt the communities that workers left, either:

"With less labor supply in the regions that they left, wages would then increase there, and fall in the regions they were moving to, as the supply of workers increased. As a result, for more than 100 years, the average incomes of different regions were getting closer and closer together, something economists call regional income convergence. Wages in poorer cities were growing 1.4 percent faster than wages in richer cities for much of the 20th century, according to Elisa Giannnone, a post-doctoral fellow at Princeton.

But over the past 30 years, that regional income convergence has slowed. Economists say that is happening because net migration—the tendency of large numbers of people to move to a specific place—is waning, meaning that the supply of workers isn’t increasing fast enough in the rich areas to bring wages down, and isn’t falling fast enough in the poor areas to bring wages up."

It seems that even though wages might be much higher in cities like San Francisco, even for a policeman or carpenter or any number of occupations that aren't related to the city's tech industry, too few people are moving to such high-paying cities to bring down wages, and too many people are staying in lower wage areas to raise pay there.

So why are we staying put these days? A couple of professors cited in Samuel's article, Ganong and Shoag, believe the answer is housing. The cost of housing in high-wage cities has grown much faster, tilting the risk-reward analysis away from workers making the leap to these new cities.

"They find that though janitors still earn more in the tri-state area than in the Deep South, the move no longer presents an obvious opportunity because the costs of living in New York have gotten so high. Janitors in the New York area now spend on average 52 percent of their incomes on housing, the authors find, compared to lawyers, who spend just 21 percent of their incomes on rent."

With housing costs like that, we shouldn't be surprised if low wage workers in other parts of the nation realize the juice isn't worth the squeeze, and just stay in their current city. Their higher wage, higher wealth counterparts may end up making the move though, exacerbating wage inequality in the process.

Housing prices in these high-wage cities, the innovation hubs that Enrico Moretti describes in The New Geography of Jobs, are rising faster than their corresponding wages as a result of zoning and regulation. Regulation in these cities prevents new housing from being developed at a rate sufficient to meet the demand. Such laws are commonly driven by a kind of nimbyism of those who already own property. After owning a single family home, a resident seems to become a lot less open to high-density construction or multi-family housing in his community, especially since high demand for housing raises the value of his investment.

As a result, the places most in need of new housing do not see sufficient new development, at a striking cost: "[a] separate paper by Moretti and Chang-Tai Hsieh of the University of Chicago found that lowering housing regulations in San Francisco, New York, and San Jose, to the level of regulation in the average U.S. city would increase GDP by 9.5 percent."

This is all pretty abstract though. We all know that New York and California are expensive. What's the takeaway for an individual who's just trying to do the best she can financially in the meantime?

After reading the article, it struck me how much home ownership has changed our desire, and our ability, to be mobile. For a while, Mrs. Done by Forty and I were planning to move to New York City for a year or two, while she was writing her dissertation. In the end, it wasn't the expensive rent or the complications with convincing my bosses that dissuaded us, but our house sure ended up being a tough problem to solve. Would we just rent it out and try to manage it from afar? Could we leave it unoccupied and ask the neighbors to keep an eye on it? Should we sell? And what about all our things?

Our home, at least as mobility was concerned, was an anchor. It was a pretty illiquid asset; one that required selling, renting, or some form of oversight if we wanted to live somewhere else for a year.

On top of that, it served as a place to fill with new things: way, way more things than we had when renting. Maybe that's a coincidence, but I feel like once owned, a home (especially one with a garage or a shed) has a propensity to serve as a physical representation of Parkinson's Law: stuff will fill all the available space provided.

In any case, for those still trying to establish themselves in their careers and earn an income that's commensurate with their skills, I'd highly recommend renting. When opportunity arises, you'll be more able to pursue it quickly. (And success often hinges on pursing opportunity quickly.)

And lastly, we property owners should probably be more accepting of new housing development, even if that means changes to our existing neighborhoods, and even if that means our property won't increase in value quite as much. Instead of thinking of our homes as an investment or a store of wealth, we should think of it as a too-scarce and too-expensive commodity: one necessary for all of the people living here but, just as importantly, all the future residents who might want to move to our city, too. 

As always, thank you for reading.


*Photo is from ground rule double at Flickr Creative Commons.