Reports: Rising Rental Costs Block Americans’ Career Moves, Income Gains

CHICAGO, IL - MAY 31: A "For Rent" sign stands in front of a house on May 31, 2011 in Chicago, Illinois. According to the Standard & Poor's Case-Shiller Home Price Index home prices fell in March in 18 of the 20 metropolitan areas monitored by the index, reaching their …
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Rising urban rents are reducing the economic incentives for young people to migrate into bigger towns and cities for better-paying careers, say U.K. and U.S. studies.

“Work from the US has shown that while there are higher earnings to be found in more productive states, the [economic gain from] moving to these better-paying areas have diminished since the mid-1990s because higher housing costs have absorbed much more of the gain,” says the British study titled “Moving Matters: Housing Costs and Labor Market Mobility.”

The British study and the subsequent media coverage carefully ignored the most important factor in rising housing costs: the growing influx of international migrants who are raising the demand and prices for housing.

The British report notes that the rising housing costs hit young British people the hardest, making it more difficult for them to form their own families. Because “moving matters especially for those at the beginning of their working lives, we can see once again that the housing choices of today’s younger people are bearing down on their living standards to a greater extent than they did for previous generations at the same age,” the U.K. study said.

The left-wing Guardian described the study:

More young people are getting stuck where they grew up or went to university because they cannot afford rents in places where they can earn more money, according to the Resolution Foundation think tank. It found the number of people aged 25 to 34 starting a new job and moving home in the last year had fallen 40% over the last two decades.

Whereas previous generations were able to move to big cities such as London and Manchester or regional hubs like Leeds and Bristol to develop their careers, the current millennial generation is enduring a slump in mobility caused by rising rents, which can wipe out the financial gains of a move.

The study also says the rising rents are pushing more people into longer commutes:

Those that choose to move to cheaper housing cost areas but stay in the same job – or to move both job and home but to live in a cheaper area further away from where the job is located – will need to travel further to work each day … [and] the average travel-to-work time for all age groups has increased over time, from 25 minutes for 25-34 year olds in 1996, for example, to 32 minutes in 2017.

The British study matches a 2017 U.S. study about widening wage gaps in the United States that said that “rising housing prices in high-income areas deter low-skill migration [by Americans into wealthier cities] and slow income convergence” between rich and poor.

The U.S. study titled “Why Has Regional Income Convergence in the U.S. Declined?” noted:

Lawyers continue to earn much more in the New York area in both nominal terms and net of housing costs, but janitors now earn less in the New York area after subtracting housing … for lawyers in the New York area, housing costs are equal to 21% of their income, while housing costs are equal to 52% of income for New York area janitors. While it may still be worth it for lawyers to move to New York, high housing prices offset the nominal wage gains for janitors [who move to New York] …

In the mid-twentieth century, low- and high-skill workers moved from low-income to high-income places. In recent years, as high-skill workers move to high-income places, low-skill workers leave. We call this phenomenon “skill sorting”.

Like the U.K. study, the U.S. study does not identify the impact of international immigration on housing costs.

But many other studies show that immigrants concentrate in coastal cities and that immigrants spike housing costs. Both factors combine to help price Americans out of coastal cities — and so deny them the decade-by-decade benefit of better careers and rising real estate wealth.

Investors also admit that immigration boosts housing and real estate prices. Breitbart News reported in May:

EIG’s April 2019 proposal for more imported workers and consumers admits that the current immigration policy favors large cities, saying:

It currently serves to increase the regional disparities highlighted above: the fastest-growing decile of counties has proportionally more skilled immigrants than the slowest-growing one by a factor of eight. What is more, the 20 most populous U.S. counties currently contain 37% of the country’s skilled immigrants compared to only 19% of the country’s total population.

More broadly, the 5% of counties with the highest home prices have over half of the country’s skilled immigrants, and 90% of skilled immigrants live in the top one-third of counties with the highest housing prices.

The group also admitted that more immigration raises housing prices, which is bad for home buyers, such as young married Americans seeking to start a family. “Cheaper housing is good for first-time home buyers and renters,” says the EIG proposal, which is titled “Could a Heartland Visa help Struggling Regions?”

The problem is made worse because new legal and illegal immigrants can move faster from one city to another when employers begin to hire many people for a new factory or a construction project. The migrants move faster than natives because they have fewer family ties to keep them in one area, but also because their tight ethnic networks provide them with critical contacts needed to win jobs, apartments, and social support in unfamiliar cities.

Also, poor immigrants will gladly pool their wages to crowd into expensive apartments near their U.S. jobs, such as in South Arlington near Washington, DC.  But that common sense practice also spikes rental prices and so blocks the arrival of young Americans who do not want to lower their living standards when they move into the bigger cities. This displacement process keeps many Americans out of urban careers and housing markets, even as real estate investors loudly cheer for more immigration and more renters.

These housing factors were not relevant in the decades before the 1965 immigration law, when it was common for poor Americans in West Virginia and other heartland states to follow their relatives down the “Hillbilly Highway” to jobs in Detroit, Baltimore, and other industrial cities. Their internal migration helped create the suburban middle-class from the 1950s onwards — but that middle-class is now shrinking amid rising immigrant numbers and rising housing prices.

Immigration Numbers:

Each year, roughly four million young Americans join the workforce after graduating from high school or university.

But the federal government then imports about 1.1 million legal immigrants and refreshes a resident population of roughly 1.5 million white-collar visa workers — including approximately one million H-1B workers — and approximately 500,000 blue-collar visa workers.

The government also prints out more than one million work permits for foreigners, tolerates about eight million illegal workers, and does not punish companies for employing the hundreds of thousands of illegal migrants who sneak across the border or overstay their legal visas each year.

This policy of inflating the labor supply boosts economic growth for investors because it ensures that employers do not have to compete for American workers by offering higher wages and better working conditions.

This policy of flooding the market with cheap, foreign, white-collar graduates and blue-collar labor also shifts enormous wealth from young employees towards older investors, even as it also widens wealth gaps, reduces high-tech investment, increases state and local tax burdens, and hurts children’s schools and college educations. It also pushes Americans away from high-tech careers and sidelines millions of marginalized Americans, including many who are now struggling with fentanyl addictions. The labor policy also moves business investment and wealth from the heartland to the coastal citiesexplodes rents and housing costsshrivels real estate values in the Midwest, and rewards investors for creating low-tech, labor-intensive workplaces.

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