A Puzzle

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Kevin Williamson writes,

New York City is not only poorer than the New York State average, its median household income is, in absolute dollar terms, lower than that of such dramatically less expensive areas as Austin, Texas, or Cleveland County, Okla., where the typical household income is a few thousand dollars a year more than in New York City but the typical house costs less than a third of what the typical New York City home costs

So why don’t people move from NY to cheaper cities, until something closer to parity is restored in the cost of living? Some possibilities:

1. By some more accurate measure, the cost of living is not so much higher in NY.

2. Living in NY is an expensive taste that occurs among many people, even those of modest means.

3. NY has jobs for lower-income people that are not available in the other cities.

4. NY’s rent controls and other housing regulations have created a lot of inframarginal winners whose housing costs are well below those of the marginal resident. (Think of those who are able to buy their apartments when they turn co-op at ridiculously below-market prices.)

5. Location adjustment is a very slow process. In fifteen years, these differentials will be noticeably smaller.

I do not claim to have the answer.

13 thoughts on “A Puzzle”

  3. NYC has the widest range of affordability options in the country right there. You don’t have to leave. You can just go to a cheaper neighborhood.

  4. I view places like NYC almost like a campus. You are supposed to be there for just a little while. This is a little sci-fi or maybe Mel Brooks, but I want a coffin that delivers me to my office in the morning and then ships me home in the evening.

  5. People pinned by community attachments not available to them elsewhere.

    That is, people stay in NYC because they’re a member of some community (ethnic, religous, etc.) that has nor real prescence anywhere else. [This would apply to any city of course, NYC just may have more of it.]

    Likewise, are there lots of NYC residents who have similar sorts of attachments – everybody in their family with jobs works in NYC?

  6. Why don’t people move? Actually, they are. The domestic net migration figures show an enormous movement out of NYC.

    NYC is a nice market that appeals to three demographics: white yuppies, recent immigrants, and people on welfare. Each one of these groups is maximizing utility.

    For white yuppies, NYC is the epicenter of white yuppie culture. It cannot be had anywhere else in the country, at any price.

    For certain immigrant groups, there are historical immigrant communities (plus the power of the NYC brand overseas) that provide recent immigrants with an ethnic community that you cannot get anywhere else in the country, except for LA (which has similar migration patterns).

    For people on welfare, they’re being paid to stay. They probably can’t get better welfare anywhere else.

    Thus, for those three groups, NYC is as good as it gets, and they increase in population.

  7. Based on how much ex-NYer’s complain about how terrible the pizza is EVERYWHERE else in the country, I have to imagine part of the equation is the cuisine options.

  9. As a current and long-time resident of Cleveland County, OK and someone in the upper middle class, I can report that I feel house rich but neighborhood poor. I live in a nice, 2500 sq ft home with a three-car garage. I have a nice yard. Yet I must drive 2 miles to the nearest grocery store (it is a nice one), 15 miles to a Whole Foods, 5 miles to a decent restaurant, but 10+ miles to one of my favorite restaurants. The community is safe and pleasant, but it is basically a cultural desert. A variety of cuisine is available including good ethnic variety, but options are few and far, but traffic is light. The tradeoffs probably balance out better than most would understand–people tend to weigh too heavily the negatives when hypothesizing about what life would be like in a significant life-changing choice. If I were to move to NYC, as a portfolio manager my income might double and my wife would have true employment options where here they are much more scarce. However, much of that income increase would go to outsourcing much of what we now can/must do ourselves. Are you better off in NYC walking to a grocery store and with (spousal) self-actualizing job fulfillment/income maximization or here in Cleveland County mowing the yard and not stressing about when a family’s schedule lines up to see each other?

    Note: I realize the post is more concerned with middle and lower middle-class people. But these same tradeoffs apply to them as well. Especially the job opportunity concerns.

    • I lived in Norman 5 years myself and currently live in Los Angeles. Was pretty surprised how far far I have to drive for good restaurants and shopping here as well. Factor in traffic and parking, and I’d really favor Norman.

      My preferred middle ground would actually be something like Tulsa, which has enough culture for me still at a bargain price.

      • If you have to drive far for good restaurants in Los Angeles, you probably don’t live in Los Angeles. Unless you’re sleeping on mom and pop/local ethnic food spots which are half the reason to stay in LA haha

  11. You might have seen the discussion at Bloomberg View. I’ll add my two cents.

    According to the Census Bureau, median household income in NYC is just above $50k, and median housing costs in NYC are $1250/month.

    If we look more specifically at renters, median renter household income is around $40k and median rent is $1170 (2008-2012 5-year estimate): median rent is 35% of gross income. Which is tight but tolerable, if you consider that a household at 40k income mark pays next to nothing in income taxes. (“Households” for income and rent purposes are the same. Two unrelated roommates sharing the same apartment are, as far as I understand, counted as two households and two rental units.)

    If you wonder how come it’s possible that actual median rent is so low when you couldn’t find an apartment without holes in the walls for $1170 in NYC, one interesting fact is that 34% of renters in the city have been living continuously in the same apartment since before Y2K. Almost 10% have been living in the same place since before 1980. Both numbers are extremely high compared to the rest of the country. For example, among renters in California, these numbers are 14% and 1.5% respectively. Rent control makes for very low apartment turnover. Median rents paid by these holdout renters are in triple digits.

    Finally, numbers suggest that there’s either some sort of subsidization or income underreporting going on. In the group of renters reporting household incomes of $20k to $35k, almost 15% pay more than $1500/month in gross rent. Among renters with incomes between $35k and $50k, 19% pay more than $1500/month. It is unlikely that these entire amounts are paid out of pocket if incomes are recorded correctly.

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