Impact of the “Urban Exodus” due to COVID-19

September 21, 2020

The COVID-19 virus continues to influence every aspect of American lives from endangering the health of our family and friends to changing our leisure activities and the way we work. The disproportionate effect of the virus on cities like New York led some pundits to declare the death of cities and the rebirth of desirability of suburbs. But while the numbers offer some evidence of an urban exodus, not all researchers are certain that this phenomenon will be permanent.

Migration patterns before and during the pandemic

While the pandemic accelerated many lifestyle decisions, large cities were already beginning to see slower growth and, in some cases, population losses during the last half of the previous decade, according to research by William H. Frey, a senior fellow of the Brookings Institution. New York, Los Angeles, Chicago and Miami faced the biggest population losses between 2015 and 2019 and growth rates slowed in numerous other cities during those years, including Washington, D.C., Philadelphia and Boston. The migration from cities to smaller cities and suburbs is tied to affordability issues, with younger people looking to move places such as Tucson, Ariz., Raleigh, N.C. and Columbus, Ohio for a lower cost of living.

But Frey points out that 56 percent of U.S. residents live in major metropolitan areas and he isn't convinced, even with more people leaving cities, that this migration away from urban areas will necessarily continue. Recessions generally mean people move less often, and, after recessions, large metropolitan areas tend to gain ground, Frey wrote in his report.

While all the data isn't in yet on the pandemic's impact on renters relocating, Apartment List's Migration Report, which covered searches from January 1 through April 15, found that the number of renters looking to move followed a similar pattern to pre-pandemic searches. In addition, there was a dip during those months in renters searching outside their current location, which may reflect economic uncertainty, according to Chris Salviati, Apartment List's housing economist. The Migration Report found a slight uptick from 27% to 29% among New York City renters searching for an apartment outside the city, but there was also an increase in the number of people looking to move from another metro into New York (up from 20% to 26%).

The pattern of renters looking to move into or out of a metro area was relatively stable in most cities, with Chicago standing out as a city that may see a declining number of renters since more tenants were looking to leave the area and the number of renters searching to move into the city from out of town dropped.

More recent data from who booked a move online through HireAHelper found that between January and June, 80% more people moved out of San Francisco and New York than moved into those cities. Los Angeles had 70% more people move out than move in and Miami had 53% more people move out than move to that city.

Why smaller cities and suburbs are gaining ground

For multifamily investors, a long-term approach is more valuable than a snapshot of moving during the pandemic. The urbanization trend brought young professionals and empty nesters in larger numbers over the past 20 years, but the smaller cities and suburbs have gradually become more appealing in the last few years. The appeal is primarily affordability, but the pandemic may have accelerated the move outside cities.

“Downtown density has become a liability during the pandemic, putting city-dwellers at increased health risk by virtue of their close proximity with others," wrote Salviati in Apartment List's Migration Report. “Meanwhile, the easy access to restaurants, entertainment and cultural institutions that make cities so attractive has been temporarily shut down and may be slow to recover. A prolonged period stuck at home in tight urban apartments could also foster a craving for more space. All of these factors may lead to a shift in preferences away from the biggest densest cities and toward more affordable suburbs and smaller, less dense cities."

People who can work remotely and companies that can relocate have already begun the migration pattern to smaller cities such as Nashville, Atlanta, Charlotte and Orlando rather than continue to pay high costs in San Francisco, Seattle or New York.

In addition to the existing issue of affordability in major metropolitan areas, a recent New York Times article pointed out that the economic downturn and high costs of fighting the pandemic mean that cities will see a major drop in revenue from sales taxes, tourism and income taxes. Cities are already tweaking their budgets to reduce spending on public amenities that make urban areas attractive.

Why cities may continue to thrive

In addition to the temporary lack of access to urban amenities, a recent article in The Atlantic points to numerous sources predicting that safety concerns over violence and protests in urban areas could make the move to suburbs permanently more appealing. The long-term and potentially permanent ability to work remotely may also increase the appeal of living in a less costly, less dense location. But as The Atlantic article points out, the people who are leaving New York City right now are higher earners with the financial ability to move. Less affluent workers are more likely to move from one rental to another within the same city.

The moving patterns of renters have yet to show a mass exodus from cities and some analysts say this may not happen. Moving is expensive and stressful, so more renters are likely to stay put. In addition, the coronavirus continues to spread nationwide and now impacts many of the smaller cities and less dense locations that were thought to be a refuge from the disease.

As The New York Times article points out, recessions tend to be good for cities and for multifamily owners because jobs are more likely to come back first in urban areas with a wide range of employers. Renting is more appealing when homes are costly and when people feel less certain of their financial strength. And, of course, some people may come back to the city or stay there to enjoy the perks of urban living.