What Happens to Cities When Young Residents Move Away?
Places that are widely viewed as desirable are losing young residents–20-something Gen-Zers and Millennials.
This exodus has major consequences, as this demographic is both the prime workforce of the present and the future of the city, region or country.
Let’s start with a recent article from the San Francisco Chronicle:
Why 20-somethings are abandoning San Francisco — even when they can afford it (paywalled)
“Overall, from 2013 to 2023, the share of 20-somethings in San Francisco County dropped from about 18% of the population to about 14% — the largest such decline of any major U.S. county and nearly quadruple the national drop. The data prompts a big question relating to the city’s economic future: Is this the mere ebbs and flows of San Francisco’s demographics at play, or the start of something much grimmer?”
This article covers much of the same ground:
Why these former Bay Area residents don’t regret leaving California.
This chart of cities losing their young residents is topped by two cities I know well: San Francisco and Honolulu, Hawaii.
A similar bleeding away of young residents is occurring in New Zealand: ‘Hollowing out’: New Zealand grapples with an uncertain future as record numbers leave.
“This is a hollowing out of this demographic of mid-career workers, who in reality do the bulk of the work,” said Simplicity chief economist Shamubeel Eaqub. “That’s the jaws of death closing, and then we have labour market problems.”
The decision to move isn’t an easy one, and it doesn’t always distill down to one primary reason, but it’s clear that the feeling of being stuck in a dead-end, of feeling that you’re no longer able to get ahead in the way that you want, is a core driver of the exodus.
We must be cautious about drawing conclusions, of course, as young people are also moving into these cities. But the trend is clearly non-trivial.
The high cost of living in desirable cities is an obvious factor. Owning a home is out of the question in San Francisco and Honolulu for all but the fortunate few. Staying in these high-cost places means accepting being a renter your entire life unless you earn a top 5% salary, inherit wealth or get substantial financial help from parents.
Raw population numbers mask the underlying dynamics. A city of older often-retired people living in million-dollar homes they bought decades ago and now own free and clear is not equivalent to a city of young families and workers.
Young people are the economic engines of cities. They dine out, go to clubs and frequent entertainment venues. They are the workforce for much of the economy, especially the small-businesses that keep the city from becoming a ghost town.
Older people don’t go out as much, they’re more risk-averse, and they consume less as they already have everything. They start businesses at a far lower rate than people in the 20s and 30s.
The macro-economic climate is increasingly difficult for small businesses, both established and new enterprises. Consider this semi-random selection of recent articles about small businesses closing:
‘Too difficult’: Storied Bay Area craft brewery calls it quits after 30 years.
Berkeley bakery that uses centuries-old recipe to close after 27 years.
‘Doesn’t make financial sense’: Michelin-starred SF restaurant calls it quits: “Even with the busiest the restaurant’s ever been, it just doesn’t make financial sense,” Stowaway said. “We’ve done a lot of great things and we’re proud, but the financial instability starts to affect everyone, and you have to make big changes.”
The restaurant experienced financial ‘ebbs and flows’ during its four years in the Mission District. A declining nightlife in the neighborhood was one contributing factor, Stowaway said, as many diners opted not to stay out late. One of the restaurant’s biggest financial blows occurred in 2023 when Silicon Valley Bank collapsed and Stowaway noticed a dip in reservations. The $15,000 monthly rent was another hurdle.”
Why Are These Clubs Closing? The Rent Is High, and the Alcohol Isn’t Flowing. The financial decline of some of the city’s most popular clubs has put a spotlight on the realities of nightlife. (New York Times)
“After almost 3 years of running a venue with some of the world’s best people we simply cannot afford the financial reality of this industry in 2025 and will be closing our doors this April,” the club posted on its social media earlier this year.
A cluster of nightclubs have been going out of business in recent months — casualties of stubborn rent, spiking insurance rates and decreased revenue from young people’s drinking less alcohol.
Once a low-rent haven for a creative class, Williamsburg has transformed to lean toward high-end retail chains and luxury condos.
The arbitrator sided with the landlord, Mr. Jones said, tripling the rent from what had been around $21,000 a month.
“Restaurants, bars and other establishments could get pulled into a lawsuit from a client who injures a third party after a night of drinking,” he said in an email, “so many insurance carriers are adjusting pricing for the increased risk of a lawsuit that names the restaurant as the ‘at-fault’ party.”
Within TBA’s nearly 12 years of business, their insurance costs had gone from $25,000 to $125,000.
Let’s tease apart the issues described in these articles.
1. These businesses need young residents as workers and customers. As young residents leave, the customer base dries up and the businesses are forced to close.
2. The credit-asset real estate bubble has made rents unaffordable even for successful businesses. Here’s how the dynamic plays out: a commercial building that sold for $500,000 a generation ago is now valued at $2.5 million. The new owners have to triple the rent to earn a “fair return” on the capital invested. The costs of ownership have increased, too: property taxes, insurance and maintenance costs have soared.
3. Young residents have learned by experience or observation that it’s basically impossible to start a business and survive without burning out when the rent is $15,000, insurance is tens of thousands of dollars, and finding experienced staff means paying high wages.
The landlord expecting some other entrepreneur to walk in and agree to a lease at $15,000 a month (or more) is very likely to go broke waiting for another naive sucker.
4. Many cities are a morass of regulatory sclerosis and high junk fees. It takes months and thousands of dollars to obtain basic permits, months that require paying the lease on an empty space.
The bubble-economy of the past two decades has infused city bureaucracies with a confidence that somebody will always step up and take the risk of starting a new business in the space vacated by the entrepreneur who burned out and went broke trying to operate a business in an environment of soaring costs.
This confidence is misplaced, and the resulting declines in tax revenues as businesses and young people leave is starting to bite: Los Angeles To Institute Mass Layoffs Of City Workers In Wake Of $1 Billion Deficit.
Mass layoffs mean fewer customers for small businesses already struggling to keep the doors open and stave off burnout. This is a self-reinforcing feedback loop that once started is almost impossible to reverse.
These are the “jaws of death closing:” older people aren’t starting businesses, hiring workers and going out in numbers large enough to keep the city from imploding financially and keeping it attractive to young people.
If the prime-age workforce is shrinking, it’s a challenge to find workers and pay them enough to be able to afford to live in the city where they work. A city of older people who have retired or work part-time is a city doomed to a financial death spiral.
This is especially true in California, where Prop 13 maintains low property tax rates for older owners who bought homes decades ago and jacks up property taxes being paid by younger recent buyers: the Boomer next door pays $4,000 a year, the young buyers pay $24,000 a year.
The systemic inequality of the status quo is a core driver that those who benefit from it are loathe to recognize, much less address.
These macro-socio-political-economic factors are encouraging the exodus. The Bubble Economy has enriched the older generations who bought homes and stocks at fractions of their current valuations, and these bubble prices and higher mortgage rates incentivize staying put. This incentivizes shutting down any developments that threaten the market value of neighborhoods.
It’s far easier to stop a development than it is to get it pushed through the regulatory thicket.
Two recent books describe these forces that like many other examples of Anti-Progress, began as well-meaning reforms.
Stuck: How the Privileged and the Propertied Broke the Engine of American Opportunity (Yoni Appelbaum)
Why Nothing Works: Who Killed Progress―and How to Bring It Back (Marc J. Dunkelman)
Those whose interests are served by keeping the status quo as-is have few incentives to grasp how their self-interest is dooming the city to decay and eventual collapse. The Old Guard is blind to the causes of the exodus of young residents for a very simple reason: the status quo is working great for me, so it’s working great for everyone.
This is no longer true, and what is currently a trickle of young people leaving could turn into a flood that sweeps away the unaffordable status quo in ways few reckon possible, much less inevitable.
All that’s needed to kick this off is a long overdue recession.
CHS NOTE: It would be nice to be a Trustafarian or the recipient of a 3-letter agency Black Budget line item, but alas, writing is my only paid work/job. Who knows, something posted here may be actionable and change your life in some useful way. I am grateful for your readership and blessed by your financial support.