Two years ago, this blog noted that San Jose, California, had incredible upward mobility. But it also suggested that rising house prices put that upward mobility at risk, by reducing geographical mobility. That in turn might prevent people from taking advantage of educational and job opportunities.
Now, the Atlantic voices the same worry: “Today, young Americans increasingly have to choose one or the other—they can either settle in affordable but stagnant metros or live in economically vibrant cities whose housing prices eat much of their paychecks unless they hit it big.”
In California, for example, the problem has only gotten worse. The very same 3-bedroom apartment in Mountain View that we rented for $1,724 in 1993 (in 2015 dollars, $1,040 at the time) now rents for $3,750 — a real increase of 118%.
There are cities where housing is still within the grasp of young middle class people. For example, my 20-something cousin Adam and his girlfriend just purchased a very nice 2-bedroom townhouse in Philadelphia for what amounts to a monthly payment of roughly $1,700, before the interest deduction. But that is not as easy as it sounds. It is true that said monthly payment is basically flat (in real terms) since 1999. (The price of the house has risen by 124% in nominal terms, but interest rates were a lot higher back in 1999.) But because the nominal price of the house has more than doubled, you need a bigger down payment to qualify ... and student loan burdens are a lot heavier now.
Moreover, there are two other drawbacks. First, one of the reasons why housing is still affordable in that part of Philly is that the schools are awful (albeit improving). You want better schools — and upward mobility with it — you pay more either in housing or in tuition. Second, Philadelphia, for all its charms, is not a first-tier job market the way that Boston, New York and Washington have become. (Let alone San Francisco!) You have to give up other opportunities in order to have decent housing within reach of a normal 20-something income.
America’s coastal housing shortage is good for me, as a homeowner, but terrible for the country.
The point about the crappy schools is excellent, and Philadelphia in particular. Friends whose son was born in 9/2011 moved there from NYC to take an academic job at Penn in the fall of 2014. They got screwed twice over by the school system in comparison with NY; in NY their kid would have gone to UPK in 2015-16 and kindergarten in 2016-17, but in Philly, you have to turn 5 by the time school starts, so their son won't go to school until kindergarten starts in 2017. That's two more years of full-time daycare to plan for.
Posted by: JKR | February 29, 2016 at 08:41 AM
The other way to manage it is to live way the hell out and accept a long, long commute to work ("drive till you qualify"). Obviously this is not good for either health or the environment.
For a while, tech companies in the Boston area seemed obsessed with moving further and further out to the 495 corridor and beyond where office rents were cheaper, but after the mid-2000s real-estate crash it seemed like they all rushed into the city (or back to around 128), and a lot of them stayed there while housing got more expensive again.
Posted by: Matt McIrvin | February 29, 2016 at 09:14 PM
Matt: great point. And it's worse than you suggest! First, suburban employment isn't spread across the landscape in an undifferentiated mass -- it concentrates in certain areas. Housing convenient to those areas rises in price, forcing moderate-income suburbanites into longer suburb-to-suburb commutes.
Second, long commute times seem to be directly linked to a lack of upward mobility, although the causal mechanism remains unclear. See page 36 here.
Posted by: Noel Maurer | March 01, 2016 at 10:54 AM