Tag Archives: California

Post-Recession Intra-State Variability in Metro Growth by Size

One of the changes in demographic trends after the Great Recession was a shift of growth from smaller metros and suburban counties to larger metros and urban counties. There has been a lot of ink spilled over how much of this trend is caused by different factors:

  • Structural factors, reflecting permanent changes in the economy and preferences. The story here is that the economic benefits of being in a large city relative to being in a small city have increased, and that people like cities more than they used to, both of which are causing more people to want to live in cities.
  • Cyclical factors, related only to the severe economic downturn and its concentrated impact suburban housing values. The story here is that suburban areas in large cities suffered more because their housing markets crashed harder, but when housing markets recover, it will be business as usual like it was in the 1990s and 2000s.
  • Demographic factors, related to a large cohort of twentysomething Millennials who moved to cities at a time young people always move to cities, which just happened to coincide with the Great Recession. The story here is that when Millennials get old, they will decide they want suburban houses and it will be business as usual like it was in the 1990s and 2000s.

My personal take is that it is a combination of all these things and more, but I always expected that suburban growth would ramp right back up because zoning makes it so hard to build new housing in cities. The last few years have disabused me of the idea that things would go back to business as usual. Suburban growth in the Inland Empire has not taken off like I thought it would, and cities in the Central Valley have not recovered to their previous growth rates. It seems that perhaps there have been structural changes to the US economy that increase the benefit of being in a large city. Perhaps upper class workers are also less willing to commute long distances, leading to lackluster suburban growth.

In this blog post, we’ll explore intra-state variability in growth by metro size, comparing the 1990s, 2000s, and 2010s. The goal is to see if there have been changes in relative growth rates between large, medium, and small metro areas. The reason to look at intra-state differences is that we want to ex out the impact of regional differences in growth in the US. We stand to learn more about the differences between large and small cities by comparing Tucson to Phoenix than to Chicago. We will look at a few western states (AZ, UT, and WA), a few southern states (GA and NC), a few Midwestern states (IL, OH, and MI), and California and Texas (in a league of their own, of course). I’m not going to look at Florida because of the heavy impact of retirees, who are less influenced by economic opportunity.

This analysis does not consider rural areas, which are continuing their decades-long loss of population to cities.

The West

Looking first at Arizona, no MSA has recovered to its 1990s or even its 2000s rate of growth, somewhat understandable in the case of Phoenix, since you can’t grow logarithmically forever. Tucson has always grown more slowly than Phoenix, and the growth differential is consistent. Smaller metros like Prescott, Yuma, and Lake Havasu were growing faster than Phoenix in the 90s, at the same rate in the 00s, and slower today. One note of caution is that those three areas see many retirees, so there could be factors besides economics at play. Growth in total population in MSAs in Arizona has consistently lagged Phoenix.

AZ-realAZ-relative

In Utah, the smaller metros are still growing as fast or faster than Salt Lake City, but the growth differential has shrunk since the 00s. Of particular note, the Salt Lake adjacent MSAs, Ogden and Provo, have seen their differential shrink by over 1.5%. Unlike Arizona, growth in total population in MSAs in Utah has consistently exceed Salt Lake City, though by less in the 10s than the 00s.

UT-realUT-relative

Finally, in Washington, we see the most striking change. In the 90s, most of the smaller metros were growing faster than Seattle, and the second biggest MSA, Spokane, was keeping pace. In the 10s, Seattle is growing faster than all except Kennewick, which has still seen its growth differential shrink by 1.5%. In the 90s and 00s, growth in total population in MSAs in Washington exceeded Seattle’s growth, but that has flipped in the 10s. Seattle is one of the few MSAs in the country that has grown faster in the 10s than in the 00s – let’s go Seattle!

WA-realWA-relative

The South

Looking first at Georgia, the story is a little different. Atlanta has long dominated the state, with other areas almost never growing as fast. However, unlike in the West, the general trend has been for the gap to close. This is not due to faster growth in the smaller areas; all of Georgia is growing more slowly than in the 90s and 00s. In fact, some small MSAs in Georgia have had negative growth in the 10s, but the decrease in growth in Atlanta has been larger than the decrease in growth in most other metros.

GA-realGA-relative

North Carolina has been dominated by Charlotte and Raleigh, the latter of which is North Carolina’s second largest MSA and consistently its fasting growing MSA. A few small MSAs exceeded Charlotte in the 00s, but the trend in the 10s has been for Charlotte’s growth differential to increase. Even Raleigh, while still growing quickly and faster than Charlotte, has dropped from growing 1.5%-2% faster to 0.5%.

NC-realNC-relative

The Midwest

Illinois is a different picture in several ways. No state on our list is more dominated by a single MSA, with Chicago over 25 times the size of Peoria, the second largest MSA. Chicago outpaces almost all other MSAs in the 90s, but in the 00s the small metros did as well or better than Chicago, excluding the two smallest which have consistently declined. In the 10s, Chicago again outpaces the others, except Champaign-Urbana. Chicago has grown slowly in the 10s but other than Champaign-Urbana and Bloomington, the small metros declined. The lesson, as always, is to get yourself a state research university.

IL-realIL-relative

Ohio is yet another case, with three MSAs of almost exactly the same size, but all going in different directions. Cleveland was the largest MSA in the state in 2000, but was growing slowly, and shrank throughout the 00s. Cincinnati, counter to the Rust Belt narrative, was growing at a moderate pace and became the largest MSA in the state in the 2010 census. Columbus was a good bit smaller in 1990, but has been growing quickly, and at current rates will become the largest MSA in Ohio by about 2023. Ohio is unusual in the modern US in that we are watching the dominant MSA in a state change in real time. Meanwhile, all of the state’s smaller MSAs have grown more slowly than Cincinnati and Columbus, and many have shrunk. Get yourself a state research university.

OH-realOH-relative

Michigan appears to be different than both Illinois and Ohio, with Detroit as a large, very slowly growing dominant MSA, a fast-growing mid-size MSAs (Grand Rapids), and two fast-growing small MSAs (Ann Arbor and Kalamazoo). Detroit is four times larger than Grand Rapids, and its supremacy as Michigan’s largest MSA won’t be challenged any time soon, but Michigan actually appears to be a case where mid-size Metros are outperforming large metros. Trends in Flint for the 10s are probably impacted by the terrible state-inflicted water crisis. Meanwhile, Michigan’s smallest MSAs, fewer than 200k people, are underperforming relative to Detroit in the 10s, with many actually shrinking. I’m not sure about Grand Rapids, but still, get yourself a state research university.

MI-realMI-relative

Don’t Mess with Texas

For Texas, I’m only doing the top 15 out of 25 MSAs, because, come on. This also cuts out the oil MSAs, Midland and Odessa, which are somehow not combined into one MSA.

All of Texas has grown fast. Let us pause for a moment and appreciate how much Texas is doing to create opportunity for people who can’t afford places like, well, California.

Despite impressive statewide growth, Dallas has remained the biggest MSA, at about 500k larger than Houston in 2017 as it was in 1990. Dallas has outperformed most of the smaller metros in the state throughout the analysis period, with only Austin consistently beating Dallas. If you can do it, for the love of everything good, get yourself a state research university!

McAllen and El Paso grew faster than Dallas in the 90s and 00s, since if you don’t have a state research university, becoming an important border town after a free trade agreement is signed is still pretty good. Houston dunked on Dallas during the oil boom of the 00s, but has barely outpaced Dallas in the 10s. Still, the overall picture in Texas is dominance of the large MSAs.

TX-realTX-relative

Still Golden

For California, I am going to do all 26 MSAs. And if Texas doesn’t like it, they can get their own damn blog. For the sake of readability of the graphs and general interest, I will present some analysis statewide, and then also graph things in two groups, NorCal and SoCal. If you disagree with my breakdown of north and south, I’m sorry, but my decisions are final.

On a statewide basis, the majority of MSAs smaller than LA/OC are growing more quickly. However, most of them have seen their growth differential to LA shrink, and LA actually grew faster in the 10s than the 00s (take that, haters)! The MSAs that have seen their growth differential to LA increase are mostly greater Bay Area/Silicon Valley MSAs – San Francisco, San Jose, Vallejo, Salinas, and Santa Cruz – plus Sacramento. The Bay Area’s distant suburbs like Stockton and Modesto are still growing faster than LA, but not as much as they were in the 00s. The most stunning change is the Inland Empire, which went from 2.69% growth and 2.31% greater than LA in the 00s to 1.10% growth and just 0.54% greater than LA in the 10s. Given the high price of housing in LA/OC and historic trends, you can see my surprise at relatively slow growth in the IE!

CA-realCA-relative

Looking at northern California, the change is more dramatic. Stockton, Sacramento, Merced, and Yuba City all grew much faster than San Francisco in the 00s. In the 10s, San Francisco has greatly outpaced the smaller MSAs in NorCal, with only Sacramento, San Jose and Stockton holding close to SF’s growth.

NorCal-realNorCal-relative

The pattern is clear looking at SoCal as well. Every smaller MSA grew at least 0.50% faster than LA in the 00s, with the Inland Empire and Bakersfield over 2% faster. In the 10s, only the Inland Empire has managed to grow more than 0.50% faster than LA.

SoCal-realSoCal-relative

Summary

I think the big takeaway here is that regions are different, states are different, and it’s hard to draw any broad conclusions. Some big MSAs are growing quickly, some are growing slowly, and some are shrinking – sometimes even within the same state. Some big MSAs are outpacing smaller metros and some are not. It does seem that smaller metros are generally growing more slowly compared to big metros than they were in the 00s. The only states where smaller metros seem to be doing better than larger metros are Utah, some small metros in Michigan, and college towns.

Now, large metros in CA have been seeing their growth slow down in the last year or two. But this has coincided with these counties hitting full employment and high housing prices keeping more people from moving in. It does not, yet, seem to be translating into faster growth in the outlying MSAs of larger cities (such as Stockton and the Inland Empire) or in the smaller MSAs like Bakersfield and Fresno. If it were easier to build housing in LA, might it grow faster than the IE? With luck, one day we’ll get to find out.

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Taxes in Texas

Writing in the LA Times, Michael Hiltzik wonders what the economic impact of falling oil prices will be in the Lone Star State. Predicting the future is hard, so who knows, but there’s a nice graphic in the article comparing state and local tax burden on different income groups.

Despite having relatively high sales taxes and low property taxes due to Proposition 13, both regressive policies, California’s state and local tax burden is lower on the bottom 60% of income earners. California taxes high income earners at a higher rate, resulting in a tax structure that’s at least marginally more progressive (or really, just less regressive) than that in Texas.

That’s nice, but the impact of a few percentage points of tax burden is offset by the higher cost of housing in California, probably by an order of magnitude. You might pay a little more in taxes in Texas if you’re poor, but you’ll pay much less for housing – so much less that you’ll still come out ahead. California’s more generous social programs, like wider Medicaid coverage, don’t seem so generous if you consider the additional cost of housing as functionally equivalent to a tax or premium required to access those programs.

Since, in general, rents and mortgages are paid by people with less money to people with more money, California’s high cost of housing is similar to a tax transfer from lower income people to higher income people. And make no mistake, this is a voluntary policy. While tony locales like Malibu and Beverly Hills might never be very affordable, there’s no reason for new construction in, say, Ontario or Arleta, to be much more expensive than Houston or Frisco. California’s seismic and energy codes probably make construction marginally more expensive, but this should simply be reflected by slightly higher prices and slightly smaller housing units, which we don’t see.

California’s complicated tax structure causes other regressive effects. For example, Adelanto has few options to try to shore up its tax books, so it’s trying to expand prisons in the city and charge other jurisdictions a per prisoner fee for use. This creates a political constituency that benefits from increasing incarceration rates, the social and economic costs of which will be borne disproportionately by minority and low income communities.

Texas may not be a paradise for the poor. If history is any guide, they will slash school and social program funding rather than increase taxes or use rainy day funds. But California’s progressive rhetoric rings hollow when you take a closer look, and the Golden State would need to implement many reforms before it could say it treats poor people fairly and creates opportunity for them to improve their lives.