Rising Housing Costs Drive Exodus from Major US Cities

High-Cost Cities Lose Residents to More Affordable Regions

by Faruk Imamovic
Rising Housing Costs Drive Exodus from Major US Cities
© Getty Images/Drew Angerer

In recent years, the cost of housing in major American cities has become a significant issue, prompting many residents to seek more affordable living conditions elsewhere. This trend is reshaping the population dynamics of the nation, with significant implications for both high-cost and more affordable regions.

Exodus from High-Cost Cities

Cities like New York, Los Angeles, and San Francisco, known for their vibrant culture and economic opportunities, are now witnessing an exodus of residents. The primary factor driving this migration is the skyrocketing cost of housing. Limited new construction and high demand have pushed prices to levels that many middle and lower-income families cannot afford.

As a result, these cities are seeing a stagnation or even decline in their populations. In contrast, states like Texas, Arizona, and Florida are experiencing a surge in new residents. A 2023 analysis noted that while New York continued to attract millionaires, its overall population growth was slowing, highlighting a growing divide between the wealthy and the rest of the population.

The Appeal of the Sun Belt

Meanwhile, cities in the Sun Belt region are thriving. Metropolitan areas such as Austin, Jacksonville, Raleigh, and Orlando are experiencing substantial population growth. Over the past decade, Austin's population has grown by more than 25%, while Jacksonville, Raleigh, and Orlando have each increased by over 20%. These cities offer more affordable housing and a lower cost of living, making them attractive alternatives to the high-cost coastal cities.

The majority of people leaving California are middle-class or lower-income individuals. This demographic shift is significant as it underscores a broader trend of migration toward areas that offer a more affordable lifestyle and better economic opportunities.

Austin, Texas
Austin, Texas© Getty Images/Brandon Bell

Impact on Job Markets and Social Mobility

The mass relocation is having a profound impact on job markets across the country. The COVID-19 pandemic accelerated the shift towards remote work, allowing many to move away from high-cost cities without sacrificing their jobs. This phenomenon, described as "domestic offshoring" by the workforce analytics company ADP, has led to a decentralization of economic activity.

In the short term, this shift benefits cities like Austin and Raleigh by boosting their regional economies and creating new job opportunities. However, in the long run, this trend poses challenges for social mobility. As middle-class jobs migrate to lower-cost areas, employees are increasingly segregated from their employers, making career advancement more difficult. This separation can lead to a dangerous imbalance of power between cities and contribute to the hollowing out of cultural and economic diversity in America's largest urban centers.

Regional Inequality and Its Consequences

As the country divides into high-cost and relatively affordable regions, class divisions become more pronounced. Historically, social mobility has been linked to geographic mobility, with individuals moving to boomtowns to pursue better opportunities. Living in a thriving urban center provided access to professional networks, higher-paying jobs, and investment capital for new businesses.

For instance, a developer from Nashville moving to the Bay Area could connect with venture capitalists and secure funding for a startup, eventually bringing new opportunities back to Tennessee. Such dynamic exchanges become impossible when people are priced out of these cities. The loss of these opportunities doesn't just affect individuals—it impacts the national economy. A 2019 study by economists Chang-Tai Hsieh and Enrico Moretti found that the housing shortage in superstar cities significantly constrained U.S. economic growth by limiting access to the most productive areas.

The Effects of Domestic Offshoring

Domestic offshoring, where middle-class jobs move to lower-cost areas, further exacerbates regional inequality. This trend means that middle- and working-class employees are often physically separated from their employers, which makes it more challenging for them to advance professionally. The ADP study noted that this growing separation leads to a concentration of high-powered individuals in expensive metropolitan areas, while middle-class jobs are pushed to regions with lower labor costs.

This process not only changes the economic landscape but also has significant social implications. Cities that once boasted diverse, vibrant cultural scenes are now at risk of becoming homogenized. The movement of middle-class jobs away from superstar cities hollows out these urban centers, reducing the variety and richness of cultural and economic activities available.

Consequences for Urban Centers

As America sorts into high-cost and relatively affordable regions, class itself has become an increasingly regional phenomenon. This division impacts not only the individuals who move but also the cities they leave behind and the cities they move to. High-cost cities like San Francisco and New York, which once thrived on a mix of different economic classes, are now becoming more polarized. These cities are increasingly split between a wealthy elite who can afford the high cost of living and a service class that supports them.

A city dominated by managers and executives will never truly be representative of the wider population. If the trend of domestic offshoring continues, fewer middle-class professionals will remain in these urban centers, which will instead become luxury-service economies. Corporate leaders will still create jobs in these cities, but they will primarily be low-wage positions necessary to maintain the executive lifestyle, such as food servers, house cleaners, and nannies.

The cultural and social vitality of cities depends on a diverse mix of residents. When middle-class professionals are pushed out, the cities they leave behind suffer from reduced economic dynamism and social cohesion. This growing divide creates a feedback loop, where the cost of living continues to rise, pushing more people out and leading to further economic and social stratificat