Make Sun Belt Cities More Like New York and Los Angeles

(Bloomberg Opinion) -- Add this to the pandemic lesson book: People may be willing to give up their homes in high-cost, densely packed coastal cities, but they still want their coastal lifestyles — just with a little more space, cheaper real estate and warmer weather.

Two years after fears of Covid-19 unleashed a wave of migration across the country, U.S. communities are still struggling to adapt to the demographic changes. We're beginning to see signs of recovery in cities like New York and San Francisco that saw an exodus of high-income knowledge workers who had the ability to work remotely. (Even though office occupancy suggests they may never come close to pre-pandemic norms.)

But it's the places where those workers settled that are experiencing the growing pains of a new cohort of migrants. Former coastal residents who left for cheaper pastures still want the same kinds of major-metro amenities to which they've become accustomed — and the Sun Belt destinations they've flocked to don't have enough of them. To put it another way, we need more Whole Foods stores — and other types of cosmopolitan consumption outlets — in the Sun Belt.

Recent population data from the U.S. Census Bureau confirmed the anecdotes: The biggest population outflows over the past year were from coastal cities like New York, Los Angeles and San Francisco. And a recently released study from Vanderbilt University and Georgia Tech shed more light on who was leaving and why: high-income households, and mostly for lifestyle reasons. The migration patterns of low-income households have been relatively unchanged.

Of course, people have been moving from the Northeast to Florida for decades, but the pandemic migration was a distinct phenomenon and it has important implications for developers and city planners. The stereotypical migrant has been someone approaching retirement, maybe a public-sector worker with a pension, moving from a state like New Jersey or Illinois to Florida or Arizona in search of cheaper housing, lower taxes and warmer weather. Though the new migration is prompted by some of the same reasons, it's different kinds of people moving with different kinds of lifestyle preferences.

People moving to take advantage of their ability to work remotely tend to be well-educated, high-income and mid-career. And while they're moving to lower-cost locations, they still want to live like they did in those higher-cost cities. Unlike with retiree migration, good schools are also likely to be a factor.

Historically, well-paid knowledge workers gravitated towards the coasts while Sun Belt metros boomed thanks to jobs in real estate and lower-paid fields — after all, employers were attracted to the Sun Belt for its plentiful land, cheaper labor and low taxes. So it shouldn't be a surprise that the supply of neighborhoods, real estate and retail that caters to well-educated, high-income people is lower on a per capita basis in Tennessee or Georgia than it is in California.

Comparing the number of Whole Foods locations is a useful way for quantifying the problem. Of the demographic traits it considers when deciding where to put stores, the most important is education. High-income coastal states and metros are better-educated than their Sun Belt peers.

So California, Massachusetts, Connecticut, New York, New Jersey, Maryland and Washington, D.C., have 206 Whole Food stores, compared with 115 in Arizona, Texas, Florida, Georgia, North Carolina and Tennessee.

When out-of-state migrants bring their big real estate budgets to town, they don't have as many neighborhoods to choose from with the characteristics they want. And when they beat out local buyers for homes, those local buyers are pushed out into the suburbs and exurbs — Whole Foods deserts. It's a new twist on gentrification.

“Build more housing” is one obvious answer to this problem. But developers also need to be luring more Whole Foods stores to create neighborhoods that cater to tastes honed on the coasts.

Going forward, the pandemic migration wave means we shouldn't have as much divergence in education and income levels between coastal cities and those in the Sun Belt. But to keep their new residents happy, fast-growing Sun Belt metros need to evolve to meet the demands of their changing population. In other words, the Sun Belt needs to become more coastal.

More From Other Writers at Bloomberg Opinion:

New York City's Economy Still Hasn't Caught Up: Justin Fox
Remote Working Isn't Going to Kill Off New York: Pete Saunders
The World Doesn't Need Financial Hubs Anymore: Paul J. Davies
Florida May Lose Some of Its Shine for Baby Boomers: Conor Sen

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Conor Sen is a Bloomberg Opinion columnist and the founder of Peachtree Creek Investments. He's been a contributor to the Atlantic and Business Insider and resides in Atlanta.