COVID-19 and the Myth of Urban Flight

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Wharton’s Jessie Handbury talks with Wharton Business Daily on SiriusXM about the impact of the pandemic on urbanization.

Stories about city dwellers flocking to the suburbs during the COVID-19 pandemic are so persistent that even President Donald Trump repeated one during his October debate with Joe Biden, calling New York City a “ghost town.”

“For so many years I loved it, it was vibrant. It’s dying, everyone is leaving New York,” Trump said.

While some cities — especially Manhattan and San Francisco — have experienced small population losses since the pandemic began, the data on moving patterns shows the stories are largely an urban myth. There isn’t much science to support the notion that metropolitan centers will begin to shrink after decades of growth spurred by young people seeking the bright lights of big-city life.

“I think it’s possible that we’ll have a short-term shift in the demographic … for a few years. But I do think this is not going to be dramatic, and it’s not going to be a reversal of the trends that have been seen over the past 10 or so years,” Wharton real estate professor Jessie Handbury said.

Handbury spoke about urban migration during a recent broadcast of the Wharton Business Daily radio show on SiriusXM. (Listen to the podcast at the top of this page.)

Most Relocation Is Temporary

Many downtown businesses have boarded up this year, unable to survive the financial losses that have come with lockdowns, less foot traffic and fewer customers. Urbanites have left because of job loss, or because they can work remotely and chose to ride out the pandemic with family or take advantage of cheaper rents in the suburbs. And a small contingent has left because they can; some wealthy families have temporarily relocated to their second homes.

Handbury said a small percentage of those who left cities will not return, and the pandemic likely pushed them into a decision about moving that was in the works for some time. But once the pandemic is over, she noted, new businesses will open up and replace the ones that closed.

“Once the businesses are back up and running, and the uncertainty of demand has been resolved, you’ll see the traditional college graduates come in to fill in the ranks behind those families that maybe have accelerated their moves out to the suburbs,” she said.

Urbanization has been a research focus for Handbury, who published a paper last year that examined the striking rise in college graduates moving to urban centers since 2000. In the paper, “Urban Revival in America,” Handbury and co-author Victor Couture, an economics professor at the University of British Columbia, found that non-tradable services — amenities such as restaurants, nightclubs and gyms — play an important role in urban growth. Better starting salaries for young professionals along with the trend of delaying marriage and children have also fueled the growth.

“They’re living differently these days. They have more high disposable income. People tend to be looking to spend more at restaurants, to go to a Soul Cycle class, to live in a way that’s outside of their homes,” Handbury said. “That has, over the past 20 or so years, made downtowns more attractive, particularly for the college-educated and for young people. And that draw has essentially been totally stopped in the past year.”

“This is not going to be dramatic, and it’s not going to be a reversal of the trends that have been seen over the past 10 or so years.” –Jessie Handbury

There’s a “feedback effect” to urban growth, which is a higher tax base that enables local governments to spend more money on improvements. That effect works in reverse, and Hanbury said cities will likely decrease such spending in the next year or two before the bounce-back.

Handbury also dispelled the myth about hordes of older empty-nesters selling their spacious suburban homes and buying smaller digs in the city. Again, that percentage is small and eclipsed by the numbers of young people moving to cities.

“But for those who did move downtown into cities — my in-laws are living in downtown Baltimore — life is pretty dull at the moment,” she said. “I wouldn’t be surprised if a decent number have been moving out to the suburbs to live near their grandkids and things like that. Those moves could also slow down over the next few years if there’s greater fear, particularly, of the disease and living in dense areas.”

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