When rent gets ridiculous, talent runs away. Just ask these cities.
San Francisco protesters take aim at high housing costs (Getty Images)

When rent gets ridiculous, talent runs away. Just ask these cities.

It takes a lot to chase ambitious people out of America's costliest cities. Yes, rents are steep; homes are tiny; restaurants are crowded and commuting is tough. There's lots to complain about. But the idea of abandoning these exciting magnet cities seems unthinkable.

Still, if housing costs keep escalating, to the point of being truly ridiculous, will everything finally reach a breaking point? A new report from LinkedIn's Economic Graph team tackles that question by focusing on recent job-migration patterns in the 20 largest U.S. metro areas.

Specifically the study looks at whether each big metro area is gaining more people from smaller cities than it's losing over time. The study compares 2019's migration patterns with those of 2015 -- and then pairs these findings with each location's current housing costs.

As the charts below show, affordability matters. Highly affordable Minneapolis is gaining job-migration popularity the fastest. Other low-cost cities such as Phoenix and Philadelphia are thriving, too. Boston is in a class by itself. It's been gaining popularity, even with steep housing costs that top 30% of residents' income, as calculated by data partner Zillow.

No alt text provided for this image

The most eye-catching findings are in the right-hand chart. In high-cost metros -- where housing expenses exceed 30% of residents' income -- it's hard to lure new talent or even retain existing stars. That's an especially severe challenge in the West Coast's biggest cities, where housing costs can top 40% of residents' income.

Where is the pinch most severe? The San Francisco Bay Area (and, to a lesser extent, San Diego and Seattle) deserve a closer look. In the San Francisco-to-Silicon Valley hub, housing costs have climbed to a terrifying 51% of income, according to Zillow. A typical one-bedroom apartment in San Francisco will set you back $3,700 a month. Even a modest, 1,800-square-foot home in nearby suburbs could cost $1.5 million or more.

At California State University, Chico, about 160 miles northeast of San Francisco, career adviser Jeffrey B. Harrington has seen a huge difference in the way his school's graduates think about relocating to the big city. "A decade ago," he says, "moving to San Francisco itself was the dream. Students had specific neighborhoods picked out."

Then, as San Francisco got costlier, Chico State graduates started targeting San Francisco's East Bay suburbs. Now, even those locales are out of reach. "We talk to students who get job offers of $56,000 a year in San Francisco, versus $50,000 in Sacramento," he says. "For them, it's a no-brainer. They're all moving farther away from San Francisco. They know they can have a better standard of living away from the Bay Area."

Silicon Valley's startups are making big adjustments, too. "You might still want to start your company here," says Sarah J. Crews, founder of Crews Talent, which advises Bay Area startups on their human-resources strategy. "But you won't want to scale it here."

Instead, local tech startups are opening satellite offices in places as far away as Denver, New York and Ireland, even when they have as few as 50 people on the payroll, Crews says. The goal: to grow faster, more smoothly and more affordably.

For skilled mid-career workers in all sorts of Bay Area jobs, there's a growing temptation to move somewhere else, in pursuit of lower costs, bigger homes and perhaps a more family-friendly tempo. Jared Redick, a San Francisco-based career counselor, says geographic flexibility is now a discussion topic for 70% to 75% of his clients. Even if they don't end up moving to Oregon, Utah or Colorado, such possibilities are on their minds.

Scott Harbin, a cyber-security engineer, uprooted from the Bay Area in 2017, taking his specialty to new employers in Austin, Texas. It's been a winning move, he says, mostly because of a much lower cost of living, but also because of other benefits such as easier commutes and new friends.

Similar dynamics are playing out in San Diego, where housing costs have climbed to 44% of average income. The metro Seattle area feels some of the same pressures, but its talent-migration profile also is being shaped by a strategic switch on the part of Amazon, the region's biggest employer.

After years of breakneck hiring in Seattle, Amazon about two years ago decided to focus much more of its recruiting on other parts of the United States. Amazon's rather tangled search for a "second headquarters" attracted much of the attention. (Arlington, Va., ultimately won that search, after zigzags chronicled here.) But cities such as Boston, Chicago, Dallas and Nashville, Tenn., also are gaining favor with Amazon recruiters.

The result: Seattle's overall economy remains strong. But its frenzied rate of talent inflows has moderated, now that Amazon is trying harder to drive growth outside Seattle. In some circles, that's seen as a welcome change, given the degree to which Amazon's once-frantic Seattle hiring was creating the risk of San Francisco-sized imbalances.

In the Minneapolis area, where Zillow calculates housing costs at just 23% of average income, talent-migration trends are more robust than in any other big urban area, with most of the migration coming from smaller cities. "We're seeing growth in light-industrial jobs, hospitality and skilled professions," says Vincent Branchaud, a business development specialist at Seek Careers/Staffing, in Minneapolis. "A lot of growth is happening here."

Are runaway housing costs in Minneapolis's future? Perhaps, but sticker shock is still far away.

LinkedIn data scientists Brian Xu, Michael Lombard and Jenny Ying contributed to this article

Eric Bacyinski

Connecter | Educator | Strategist

4y

Would be interested to see the impact of this on 'second-tier' cities (Sacramento, Tacoma, etc. )within driving distance of the mega-cities experiencing this growth (SF, Seattle, etc.); anyone have a related link or follow-up?

Bradley Mack

Lead Carpenter at Pence/Kelly Concrete, LLC

4y

🙌

Like
Reply
Brent Lightsey, MBA

Simplify Power BI Monitoring, Administration and Governance

4y

One word: "OOOOOOOOOOOOOOOOOOOOOOOOOOOOk-lahoma!"

Tak Nomura

Retired at World Traveler

4y

I think the only people who are able to survive in the San Francisco Bay area are like our family who bought here long before the hi tech industry was born.   I paid off our mortgage in 1998 when I retired, but I doubt many did the same.    Buying here is ridiculous not only for the housing cost, but for everything else.   We love it here, because it's still a youthful environment with Stanford, University of Santa Clara, and UC Berkeley within driving distance.   Also, the Pacific Ocean, the Sierra Nevada Mountains, and the wine country up north in Napa and Sonoma Counties.  The climate is moderate, and usually safe in most communities in Northern California.  

Like
Reply

To view or add a comment, sign in

Insights from the community

Others also viewed

Explore topics