Reporting about the rising real estate and housing costs in San Francisco and the Bay Area isn’t exactly breaking news. But a new study published this week demonstrates just how much pressure high-income new arrivals have placed on the region’s real estate market, and how wealthier and wealthier individuals are getting pushed out by the seemingly inexorable rise in housing costs.
Last year, the income of those leaving the Bay Area reached $81,500, while the average household income of new arrivals hit $90,000. These stats make the region a significant outlier on a national level, and offers more proof of the region’s accelerating real estate values, its affordability crisis, and the claim that wealthy former San Franciscans are putting pressure on a number of nearby cities.
The research and report, conducted by Issi Romem, chief economist at BuildZoom, and published by SPUR, a Bay Area urban planning and research non-profit, shows how rising prices are impacting migration. It suggests that those feeling deterred from moving to the region due to high prices, as well as those who leave the area because of the same high housing costs, are at a higher income level that some may have expected.
“By dampening the flow of newcomers and tipping the scales so that more residents leave, the rising cost of housing prevents the population from exceeding what the current housing stock can accommodate,” Romem writes. “This price driven mechanism has implications with respect to the identity of who moves to the Bay Area, who stays and who leaves, however.”
Romem examined 12 years of data from the American Community Survey and found that the incomes of those moving in and moving out rose faster than the area average. That suggests a few things. In-migration is becoming more financially selective, and attracting those employed in high-wage sectors of the economy, likely the tech sector (61 percent of new arrivals have a college degree, versus 47.7 percent of current residents). Increasingly higher incomes are needed to make a move here financially viable.
In addition, higher and higher costs have changed the calculus for even wealthier segments of the current Bay Area population, making it more attractive to sell homes in this hot market and use the proceeds to move to a less expensive city. Those on higher rungs of the socio-economic ladder are also feeling shunned, and see greener pastures elsewhere. Romem found that while those leaving the Bay Area saw their salaries drop from $81,500 to $68,200 once they left, on average, even that new, lower paycheck was better than the median salaries in most major U.S. cities, including Chicago, Los Angeles, Dallas, and Atlanta.
The Bay Area is still a relatively dynamic regions. Roughly 1.7 million people left and nearly 2 million moved in between 2010 and 2016, Romem found, indicating one-fifth of the population changed. New residents aren’t all high flyers, either: more than half a million migrants with income below $50,000 arrived during that period, 337,000 of whom came from elsewhere in the U.S.
But as these migration figures make clear, the population is increasingly skewed towards high earners, making the Bay Area less hospitable to those with lower salaries. “The human cost is real,” he concludes, noting that “Those leaving the area or deterred from moving to it pay a price in terms of lost opportunity. It is ironic that for many Bay Area homeowners, realizing the gains from escalating property values requires leaving the Bay Area.”