From 2005 to 2009, low- and moderate-income households moved out of our nation’s most expensive cities at disproportionately high rates, while high-income city residents by and large remained.

For example, a report by Trulia reveals low-income households earning $30,000 or less made up 17% of the population of these major cities. But this group made up 26% of those moving out of the city, a disproportionate share. Moderate-income households making $31,000-$60,000 made up 22% of the population but made up 24% of those moving out of the city.

Together, households making less than $60,000 make up half of the residents who left the city during 2005-2009.

The higher the household income, the less likely they are to leave the city for the suburbs.

Workers in certain low-paying industries are more likely to exit the cities for the suburbs than others, with:

  • 22% of those leaving made up of workers in the Education, Health & Social Services industry;
  • 16% coming from the Professional, Science, Management, Administration & Waste Management industry; and
  • 9% coming from the Finance, Insurance, Real Estate, Rental & Leasing industry.

The disproportionate rate of low- and moderate-income residents leaving the cities is no accident. The likeliest culprit: rapidly increasing costs for housing and other living expenses in the cities.

Costly California

The problem is dire in California, which contains six of the top ten metropolitan areas seeing disproportionate numbers of low- and moderate-income residents move out of the city. No coincidence, California is also home to some of the most expensive housing in the nation.

In California, the effect is worse in cities with already-low populations of low- and moderate-income residents. Low- and moderate-income households made up:

  • 27% of households in San Jose but made up 49% of those leaving;
  • 34% of households in Orange County but made up 51% of those leaving;
  • 30% of households in San Francisco but made up 43% of those leaving;
  • 34% of households in Oakland but made up 44% of those leaving;
  • 41% of households in San Diego but made up 50% of those leaving; and
  • 48% of households in Los Angeles but made up 56% of those leaving, according to Trulia.

Why is this a problem?

The issue of long-term, lower-income residents being forced out of their neighborhood due to a rapidly rising cost of living — and being replaced by high-income residents — is called gentrification. This is mainly a social issue affecting the long-term residents and cultural makeup of a neighborhood.

Another issue arises when workers essential to a city’s infrastructure who happen to be paid low or moderate wages (e.g. police officers, teachers, firefighters and most other government employees) are unable to live in the city they serve. San Francisco has a big problem keeping teachers around due to the high costs of living in the city. There, schools see 25%-30% teacher turnover each year, twice the national average rate.

Real estate professionals can prepare for this shift by becoming familiar with their local cities and nearby suburbs. The coming years will see more families moving between suburb and city, so familiarity with both parts of your region will be integral to continue serving former clients.