In a recent report, the Canada Mortgage and Housing Corporation discussed the effect of slowing population growth on real estate in Toronto:
“At least part of the reduction in ownership demand (in Toronto) over the second half of 2012 can be linked to weaker migratory flows into the region. Net migration for Ontario over the past year ending in September 2012 declined by more than 20 per cent as a decreased number of people from other countries came to live in the province and an increased number of Ontarians migrated out. This suggests that the GTA (which doesn’t have updated data for 2012 but represents roughly 70 per cent of the province’s migration flows), saw the number of net new people decline to below 60,000 for the first time since the late 1990s.”
Everyone is heading to Alberta, where the jobs are. Toronto isn't the draw that it used to be. The Innovation Economy is converging.
The other factor is agglomeration pushing people out. The rent is too damn high. Exodus California:
An analysis by Jed Kolko, the chief economist at Trulia, a real estate data company, argues that the crucial driver of out-migration from California toward states like Texas is home prices, not taxes. He bases this argument on a few important findings. First, while California has significant net out-migration, it experiences very slight net in-migration by households making more than $200,000 a year. The biggest out-migration is by poor and middle-income cohorts. This is inconsistent with the theory that California drives rich people (or “job creators”) away with high top-income-tax rates.
Additionally, Kolko looks at the relationship between the California home price premium -- the difference between average home prices in the state and the national average -- and out-migration, finding that as home prices fell in California relative to the country, out-migration fell, too. A regression analysis showed that the home price gap was a much stronger predictor of out-migration in a given year than the difference in tax burden, though both mattered.
Conservatives and liberals both tend to have the wrong reactions when confronted with this analysis.
Everyone is heading to Texas, where the jobs are. California isn't the draw that it used to be. The Innovation Economy is converging.
The good news for Toronto is that falling condo prices should make the metro attractive again. Same goes for California's big cities, right? That's the theory:
This would have been a good opportunity for Cox to reference Ryan Avent’s excellent book The Gated City, which argues that the U.S. would yield significant economic benefits if its highest-productivity regions had a lower cost of living. But because many high-productivity regions have a high cost of living, many households, particularly less-educated and less-affluent households, have migrated to low-cost regions — some of them in Texas — that have a lower level of productivity than, say, the San Francisco Bay Area and the New York city region.
And this is why those of us in the pro-urbanist camp favor density in high-productivity, high-amenity, high-cost regions. By building more housing units in currently capacity-constrained regions like southern California and Boston and New York, we can reduce the cost of living. This in turn will mean that less-skilled workers will be more likely to remain in these regions, and to find more lucrative service sector work than if they migrated to (relatively) low-productivity regions.
I should add that Texas’s leading metropolitan regions are becoming more productive, and there is every reason to believe that they will converge on the productivity leaders over time. But that doesn’t change the fact that affluent coastal regions can learn a lot from the Texas model, which I take to be Cox’s basic point. It’s just that expanding outward is not as viable an option in these regions as expanding upward.
Emphasis added. That's the problem for the winners in the New Geography of Jobs. Converging metros will also compete for talent. Cheaper condos may not be enough to save Toronto or San Francisco. More importantly, sprawling Texas metropolitan regions are becoming more productive. What's all this fuss about the magic of density?
Alberta and Texas are attracting a lot of migrants. Birthplace diversity is increasing, rapidly. Up goes productivity and innovation. The magic is migration, not density.
We needn't worry about cramming more people into Toronto or San Francisco. The spiraling cost of real estate is forcing relocation, across all incomes. People of modest means are fleeing Los Angeles and putting down roots in San Antonio. Yet the urban core is hollowing out in that Texas metro. San Antonio isn't booming, converging in terms of productivity, because of density. Talent is pouring in from elsewhere. People develop, not places.