When the U.S. Census released estimates about the size and demographics of San Francisco’s 2016 population (the most recent year for which up to date information is available), the consensus was clear: On average, San Francisco was getting much younger and much wealthier.
This week, Berkeley-educated economist Issi Romem took a closer look at that data for renovation site BuildZoom and came to an even more stark (if woefully familiar) conclusion: San Francisco might be caught in a migration cycle in which newcomers filter into the city to take higher paying jobs only to later risk being priced out.
The report of how newer Bay Area resident’s earning power compares to old, titled “Characteristics of Domestic Cross-Metropolitan Migrants,” points toward a few choice conclusions:
- To a degree, this is normal. After all, access to better economic opportunities is one of the chief reasons cities remain popular, so newcomers tend to earn more after they move in. And the trend isn’t unique to San Francisco, as Romem found net wealth for migrants rising in cities like Los Angeles, New York, Denver, and Miami as well.
- But San Francisco is an extreme example: “On average from 2005 to 2016, in-migrants to the San Francisco metro earned $12,640 a year more per household after arriving than out-migrants did before they left, [...] an extreme version of a selective migration pattern,” Romem writes. Note that this long-term trend even makes up the difference for the bad times during the recession and housing bust. Note also that Romem defines “San Francisco” as the larger metro area that includes parts of the East Bay, and for the record the inflation rate on a dollar from 2005 to 2016 is about 1:1.24.
- Naturally, this drives housing prices up: “Metros with healthy economies kept attracting people, generating demand for housing. When such demand was met by abundant new construction [...] housing affordability was maintained. But in the coastal metros [...] the demand for housing fueled home price appreciation instead of population growth.”
- This means that incomes rarely have a chance to catch up to housing prices in places like SF: “In-migrants to expensive metros tend to have higher incomes and educational attainment than out-migrants, while the opposite is true in the least expensive metros. This pattern [...] helps sustain expensive metros’ housing price appreciation above and beyond any rise in incomes.”
- All of this has the makings of a vicious cycle: “This pattern suggests the notion of a transient class: individuals who arrive in expensive metros as young adults, but are priced out and leave at the point of raising children.”
As always, it’s important to remember that one study does not add up to an irrefutable and objective portrait of reality. Romem uses terms like “suggests” on purpose because there are limits to how much a researcher can conclude from the data available.
However, it’s worth noting that Romem’s conclusions correspond to many other observations about the state of families, the working class, housing prices, and the job market in San Francisco.