From the Bay to Boise: Remote Work and the Rise of the Mid-size American City
In the panic surrounding the novel coronavirus, news stories proffering the myth of a mass exodus from the chaos of cities to the calm of suburbia have proliferated. Though the data shows that the ability to work remotely, due to the pandemic, indeed sped up outward migration from big cities like New York and San Francisco, the data also reveals that those leaving are not fleeing to the suburbs, but rather to smaller cities like Boise, Nashville, and Oklahoma City. This outward migration is part of a larger demographic trend that has been going on for at least five years due to the mounting affordability crisis in large cities, and cannot be explained by either the violent crime (which has declined in most cities over the past several decades) or poorer health outcomes that have dominated the narrative in the media. As a growing number of companies promise to transition an increasing proportion of their employees to telework, the disjointed relationship between where you live and where you work could leave even more people questioning whether big cities are offering enough benefits to justify the high cost of living. Only time will tell whether or not the temporary acceleration of this shift towards smaller cities will continue, but even if it merely returns to the same pace as before, it is clear that mid-size cities have been presented with a tremendous opportunity for growth, and that larger cities will need to address the affordability crisis to remain competitive.
The cost of living in New York and San Francisco has far outpaced increases in incomes and wages. A study from 2005 to 2017 revealed that the cost of living in New York City alone had risen at nearly twice the rate of incomes, while PayScale found that NYC’s cost of living was 129 percent higher than the national average. It is important to note that New York’s median income is only $3,000 more than the national median, which in practical terms means that the average New Yorker’s wage barely covers the basic costs of rent, food, and transportation. Prior to the pandemic, these factors pushed an average of 277 people to move out of the city each day. As for San Francisco, from 2000 to 2015, the city saw the cost of living rise 78.4 percent, while there was only a 41.9 percent increase in median household income. In 2015, the average home in the city was three times more expensive than the national average, and rents in the Bay Area were among the country’s highest.
The difference in the affordability of big U.S. cities compared to mid-sized cities is stark. The median cost of purchasing a house in Boise is $300,000, less than half the cost of purchasing a home in the Bay Area. Following the trend of outward migration from large cities, more than 20 percent of Idaho’s 80,000 new residents in 2016 came from California, and about 86 percent of all out-of-state views of Boise listings also came from California. The large discrepancies between wage and cost of living in those large cities have only gotten worse in the past few years, and studies show that the increasing feasibility and popularity of remote-work arrangements have made it at least temporarily possible for more people to relocate to more affordable zip codes.
There are early indicators that this trend might continue well beyond the end of the pandemic. Recently, big tech companies like Facebook, Google, and Amazon have pledged to make the option of working remotely a permanent policy, rather than a temporary measure. At the same time, in an effort to combat climate change through emissions reduction, San Francisco is in the process of instituting a policy requiring large employers to have at least 60 percent of their employees work from home by 2050. These new policies reflect not only large employers’ desire to reduce overhead costs and to protect the environment, but increasingly the proven feasibility of large-scale remote work that the lockdowns have demonstrated.
"As companies require fewer employees to come into physical office spaces, this will have a domino effect on other industries, forcing the closures of cafes, restaurants, and shops that workers once frequented."
The transition would not come without costs, however. Remote work is projected to change the overall economic makeup of cities, regardless of size. Big cities are expected to continue losing commercial property investments that they rely on for tax revenue. As companies require fewer employees to come into physical office spaces, this will have a domino effect on other industries, forcing the closures of cafes, restaurants, and shops that workers once frequented. Tax bases will also be threatened as high wage earners fleeing to smaller, more affordable cities start paying their taxes elsewhere, a trend that is projected to increase if remote work persists. Therefore, the price of real estate in big cities will have to decline in order to retain workers and make the rent costs of commercial spaces a worthwhile investment. At the same time, city governments will need to figure out ways to entice people to stay as technology increasingly makes city dwelling a choice rather than a practical necessity.
For mid-size cities, the opportunities that growth provides far outweigh the challenges. For years, smaller cities have welcomed and even scouted employers to join their communities by offering incentives in the form of cash or tax breaks. Now, they are sharing those incentives—usually $5,000-$15,000—with remote workers in the hopes of getting them to choose their city. Topeka, for example, has seen a large return on this investment, and estimates a $50,000 annual return on every $5,000 spent on worker incentives in the form of tax revenues, local spending, and jobs created by new arrivals. These cities, however, are also realizing they have to do more than just provide affordable living and cash incentives to compete with large cities and attract people from the suburbs. Many are finding that they need to invest in transportation systems, health care services, and cultural and entertainment scenes in order to build the kind of reputation that is needed to attract and retain remote workers. Boise provides a great example of these investments with increases in condo complexes, microbreweries, and public projects like a stadium and a state-of-the-art library. The rise of the mid-size city shows that those who are fleeing big cities do not necessarily want to leave city life behind; they are simply seeking similar amenities at a lower price.
Although having an expanded tax base offers cities the opportunity to pursue innovative projects and improve quality of life for residents, mid-size cities need to be careful not to fall into the same affordability crisis that is causing the protracted exodus out of large cities. Rapid growth always comes with growing pains, and mid-size cities are confronting new challenges from increased downtown traffic to gentrification. In Boise, the cost of housing rose 55 percent in one year. Should this trend continue, it is more likely than not that at some point in the future, the affordability crisis that drove people to move in will ultimately drive people to move out. Mid-size cities confronting this reality should learn from the mistakes of New York and San Francisco and develop innovative and sustainable tactics for managing growth while also remaining inclusive of the original residents and established local communities, particularly communities of color. This will allow the city to retain its unique cultural identity while simultaneously welcoming and incorporating new residents into the mix.
The pandemic drew attention to and accelerated the trend of outward migration from big cities to mid-size cities. Real estate data trends so far reveal both a continued preference for urban environments and a frustration with out-of-control living costs. This has driven an increasingly large number of people to seek out new homes that offer them the best of both worlds. If remote work polices persist beyond the pandemic, cities like Boise, Topeka, and Nashville will need to figure out how to successfully manage their rapid growth in an innovative and inclusive way that takes into account the needs of old and new residents. If they can successfully manage this transition, they could serve as important case studies for urban growth strategies that perhaps large cities like New York could learn from.
The views expressed in GMF publications and commentary are the views of the author alone.