Peak Millennial? Cities Can’t Assume a Continued Boost From the Young

[Via Chicago]

https://www.nytimes.com/2017/01/23/u...oung.html?_r=0

Over the past decade, many American cities have been transformed by young professionals of the millennial generation, with downtowns turning into bustling neighborhoods full of new apartments and pricey coffee bars.

But soon, cities may start running out of millennials.

A number of demographers, along with economists and real estate consultants, are starting to contemplate what urban cores will look like now that the generation — America’s largest — is cresting.

Millennials are generally considered to be those born between the early 1980s and late 1990s or early 2000s, and many in this generation are aging from their 20s into the more traditionally suburban child-raising years. There are already some signs that the inflow of young professionals into cities has reached its peak, and that the outflow of mid-30s couples to the suburbs has resumed after stalling during the Great Recession.

Dowell Myers, a professor of demography and urban planning at the University of Southern California, recently published a paper that noted American cities reached “peak millennial” in 2015. Over the next few years, he predicts, the growth in demand for urban living is likely to stall.

The flow of young professionals into Philadelphia has flattened, according to JLL Research, while apartment rents have started to soften in a number of big cities because of a glut of new construction geared toward urban newcomers who haven’t arrived. Apartment rents in San Francisco, Washington, Denver, Miami and New York are moderating or even declining from a year ago, according to Zillow.

“Certainly the softening of rents is one sign that they are not coming in at the pace that people thought they would,” said Diane Swonk, an independent economist in Chicago.

The debate is full of contours and caveats, but it really boils down to this: Are large numbers of millennials really so enamored with city living that they will age and raise families inside the urban core, or will many of them, like earlier generations, eventually head to the suburbs in search of bigger homes and better school districts?

[Centropolis]

i'm noticing that the millennials that do leave are going to inner suburbs (in cities that have them) that look much like urban neighborhoods, and have proximity to jobs, short commutes, etc working for them. i just dont see a lot of people bouncing over to the screaming suburban edge 1990s style, unless they were already there. once someone gets used to a more compact lifestyle, with the ability to go places without a car, exurbia looks a little alienating.

[LouisVanDerWright]

I renovate a lot of SFH and two flats in Chicago and every single one that I've sold in the last two years were to Millenial couples with one child or one on the way. No joke. These people are not leaving cities in droves, they are simply moving to slightly lower density neighborhoods where they can still get some semblance of the space offered by suburbs. But the fact remains that no one in our generation is enamored with big box stores and 1 hour commutes, especially not since huge numbers of jobs have relocated downtown.

[llamaorama]

I think the question to ask is whether or not this necessarily a bad thing, so long as urban cores also add jobs and improve broadly in other ways. Maybe if rents soften, housing will start to trickle down and the middle class will return.

I guess it depends on the city. Could be tough for places that only recently started to improve, like Detroit, Cleveland, or Buffalo. But it wouldn't be the end of the world for cities which were able to strike the iron while it was hot and created a sustained pull, like Chicago, Denver, etc.

I do fear this came at a bad time though, with Trump bullshitting about "inner city carnage" like its still 1985. Stupid assholes who have no idea that "inner cities" are no longer particularly dangerous nor are majority black. The last thing big cities need is federal government conservatives coming in and telling them what to do.

[JManc]

Originally Posted by LouisVanDerWright

I renovate a lot of SFH and two flats in Chicago and every single one that I've sold in the last two years were to Millenial couples with one child or one on the way. No joke. These people are not leaving cities in droves, they are simply moving to slightly lower density neighborhoods where they can still get some semblance of the space offered by suburbs. But the fact remains that no one in our generation is enamored with big box stores and 1 hour commutes, especially not since huge numbers of jobs have relocated downtown.

If they're fortunate enough to be able to afford those neighborhoods. No one in general is particularly enamored with big box stores and 1 hour commutes but people tend to live based on what they can afford,,even if it means a long(er) commute.

[MonkeyRonin]

They do realize there's another generation of young people coming after the millennials, right? And even if they're not quite as large of a demographic, they're still going to be heading to the same places the previous generation did at their age.

Originally Posted by JManc

If they're fortunate enough to be able to afford those neighborhoods. No one in general is particularly enamored with big box stores and 1 hour commutes but people tend to live based on what they can afford,,even if it means a long(er) commute.

And this leads to an important point - if millennials are leaving cities, it's precisely because there's too much demand to live in them that the less affluent ones can no longer afford to raise a child in one. This is a far cry from the baby boomers fleeing the city by choice, and is not presient of any sort of urban decline.

[Crawford]

Originally Posted by LouisVanDerWright

I renovate a lot of SFH and two flats in Chicago and every single one that I've sold in the last two years were to Millenial couples with one child or one on the way. No joke.

I believe you, but, to me, your experiences align with the article.

Of course some millennials stay in cities. They tend to be childless or one kid only. Two+ kid households (which would be most households) overwhelmingly head to the suburbs.

My sister, who now lives in a Chicago suburb, had a few dozen friends from college/grad school living nearby when she was living downtown, and every single friend is now either in the suburbs or back in their hometown, except for one friend, and she's divorced and childless.

It was amazing. Starting in her early 30's, all her friends sold their two bedroom homes in Lakeview, Lincoln Park, Bucktown, etc. and moved to Northern or Western suburbs. Usually it was child #2 that did the trick, or child #1 hit kindergarden age. And my sister was a committed urbanite who is very comfortable financially (she and her husband are both doctors), but, in the end, life is usually easier with kids in the suburbs.

[Crawford]

Originally Posted by LouisVanDerWright

But the fact remains that no one in our generation is enamored with big box stores and 1 hour commutes, especially not since huge numbers of jobs have relocated downtown.

I think this is true, but people take the good with the bad. Just as suburbanites generally don't like big box monotony, urbanites generally don't like piss and bums on their stoop in the morning. These things are tolerated because there are other logical reasons for living in a suburb (or city, for that matter).

And prime suburbs are usually about as accessible to downtown districts as prime urban neighborhoods. If you work in downtown Chicago, it isn't like you have a longer commute if you live in suburban Hinsdale as opposed to East Lakeview. The bus will take just as long, and probably be less comfortable, than the Metra.

[Via Chicago]

Originally Posted by MonkeyRonin

And even if they're not quite as large of a demographic, they're still going to be heading to the same places the previous generation did at their age. They do realize there's another generation of young people coming after the millennials, right?

the question is, because theyre a much smaller generation, whether they will come in the same numbers, and will it be enough to sustain the extremely rapid growth in many of these places.

[Cirrus]

1. The reason millennials are moving out to close-in suburbs is because they can't afford the cities. And the reason they can't afford the cities is because there's not enough new development to meet the demand. The recent softening of prices means the supply is just beginning to catch up. It probably also means the supply isn't quite the right form of housing, either. As millennials age and have children they're going to want more than a 1 bedroom apartment. But the city can provide that and a lot of millennials will want it to.

2. The post-millennial generation is also going to want to live in cities. The fact that they're a smaller generation may indeed mean there will be some losers in the apartment supply game, but it's likely the losers will be the far-suburban garden apartment complexes, not the cities. These things are going to be the ghettos of the 21st century. They offer neither the convenience of city apartments, nor the bucolic peacefulness of a suburban detached home. They're the worst of both world's whose only redeeming feature is affordability.

[Via Chicago]

Originally Posted by LouisVanDerWright

But the fact remains that no one in our generation is enamored with big box stores and 1 hour commutes, especially not since huge numbers of jobs have relocated downtown.

as far as big box stores, retailers have gotten savvy and found ways to integrate into traditional city neighborhoods. for all the talk about people wanting to support local mom and pop businesses, i still continue to see people doing most of their day to day shopping at national retailers, even in cities. or online for that matter. also, as real estate values rise its increasingly difficult for small retailers to remain in urban areas.

[ChargerCarl]

Originally Posted by MonkeyRonin

They do realize there's another generation of young people coming after the millennials, right? And even if they're not quite as large of a demographic, they're still going to be heading to the same places the previous generation did at their age.




And this leads to an important point - if millennials are leaving cities, it's precisely because there's too much demand to live in them that the less affluent ones can no longer afford to raise a child in one. This is a far cry from the baby boomers fleeing the city by choice, and is not presient of any sort of urban decline.

This

[Crawford]

Originally Posted by Cirrus

1. The reason millennials are moving out to close-in suburbs is because they can't afford the cities. And the reason they can't afford the cities is because there's not enough new development to meet the demand.

I don't think this is entirely true, at least not among affluent millennials.

There's plenty of development that can accommodate this crowd. In Chicago there are tons of fairly new condo and rental towers, right downtown, many with 2 and 3 bedrooms. Yet these units tend to be desirable to 20-somethings, divorcees, and the like, not young families.

Families usually don't want towers; they want a more suburban-style home with yard, even if in the city. See all the new construction in Lincoln Park, which is essentially suburban in form. And they don't want any location, they want a prime location with good schools. There are very limited urban locations that can fufill their needs, and this issue can't be solved by "more development"; Chicago doesn't have a problem on the supply side.

Not that many familes in the U.S., outside of maybe NYC, prefer to be living in an apartment building with kids. Even rarer for that family to prefer car-free existence. It's really a rare breed outside of Manhattan and a section of Brooklyn (affluent, families with kids, no car, and no desire for SFH).

[mhays]

Skimming through, key points might be missed:

1. The percentage of millennials living in core districts is still small compared to the overall millennial population. A lot of growth can continue by increasing the percentage of the pie.

2. Other demographics live in these neighborhoods too, including other demographics without kids. This can mean thirty-somethings, empty nesters, and others. Again, it's about the percentage of the pie, including the bulge of 30-somethings and retirees.

3. The softening rents are typically due to explosions of supply. And they're still high rents, just not the constant increases that have often been above inflation (though development costs have often risen more quickly than inflation). In the typical city, I bet rents will continue the march upward even with fairly decent non-explosive supply increases.

4. As buildings hit 20 or 30 years, they're more downmarket than they were on day 1, which should mean more economic diversity over time.

[Pavlov's Dog]

Empty nesters are in my opinion the next big demographic group that will start moving to urban environments in larger numbers than they have previously. One challenge is that few builders are designing for that group. My oldest son will presumably move out in two years and my wife and I are already looking at moving back to the city after 17 years in the suburbs.

We want (and I presume I speak for many others in our situation)

• something with all the urban amenities in easy walking distance but still want parking although car-share is very appealing
  
• something at about 1200 ft2 - two bedroom (one large, one for guests - ie children/grand-children), two bath maybe a third room that can be used for an office/additional guest room for short stays
  
• A private outdoor area of at least 120 ft2 but something we can travel from for an extended time - almost no builds this
  
• A smaller building - maybe something like 12-20 units on 3-6 floors.
  
• Storage for a lot of the crap we have from downsizing

joint facilities like a small gym, available guest rooms and roof-top terraces would be plusses

Unlike millenials we empty nesters usually have a lot of equity and are more oriented towards quality than price at this stage of our financial lives

[CentralGrad258]

I will add my 2 cents, being a fan of demography research and a 30 something urban dwelling professional who just had a kid. Yes this is a real thing and I seriously wonder how it will play out against the current trends. After having spent 10 years in a rapidly gentrifying neighborhood adjacent to Philly's downtown, we had to make a decision after my wife got pregnant. We could have stuck around, I would maybe even have preferred it, but the prices had risen dramatically and I really wanted a garage for my bikes.

We ended up in a leafy established neighborhood within city limits, but certainly further away from the action. But the real issue is the schools. Philly school district is a mess and I don't doubt similar problems are faced by other major cities (ours might be worse than most). Many of our friends from the hipster gentrifying neighborhood ended up moving to the suburbs for that reason. There are some that stuck around, got involved in the local public schools and I think that's awesome to see. Even in our new, established middle class neighborhood (lots of professorial types, Bernie stickers) the local public school vary from meh, to pretty bad. You see lots of private school bumper stickers and yard signs. As people my age and younger start having to make those decisions, it will have a significant impact on how well the cities retain their new professional, but mobile residents. And yes, it's a hug co-hort, significantly bigger than the one coming up behind it (kids of Gen-Xers I'm guessing).

[ChargerCarl]

Originally Posted by Crawford

I don't think this is entirely true, at least not among affluent millennials.

There's plenty of development that can accommodate this crowd. In Chicago there are tons of fairly new condo and rental towers, right downtown, many with 2 and 3 bedrooms. Yet these units tend to be desirable to 20-somethings, divorcees, and the like, not young families.

Families usually don't want towers; they want a more suburban-style home with yard, even if in the city. See all the new construction in Lincoln Park, which is essentially suburban in form. And they don't want any location, they want a prime location with good schools. There are very limited urban locations that can fufill their needs, and this issue can't be solved by "more development"; Chicago doesn't have a problem on the supply side.

Not that many familes in the U.S., outside of maybe NYC, prefer to be living in an apartment building with kids. Even rarer for that family to prefer car-free existence. It's really a rare breed outside of Manhattan and a section of Brooklyn (affluent, families with kids, no car, and no desire for SFH).

Most people can't afford to live in high rises, including millennials. The lack of affordable low/mid rise development in major cities is a large impediment to their growth and accessibility. The restriction of overall housing supply has also meant the high rises we do construct are targeted to "luxury" buyers.

Chicago is one of the few cities that is building enough overall new housing, but they also lack the job growth of a lot of coastal metros. And they're not building it in the right places: https://danielkayhertz.com/2015/03/1...he-whole-city/

In general you're right that most families probably won't want to live in high rises, but they might want to live duplexes, town homes, multiplexes, etc; we just don't give them that option.

[ChargerCarl]

delete

[MonkeyRonin]

Originally Posted by Via Chicago

the question is, because theyre a much smaller generation, whether they will come in the same numbers, and will it be enough to sustain the extremely rapid growth in many of these places.

I'm not sure I'd call it a much smaller demographic... There are 79 million people from the millennial cohort vs. 73 million from "gen-Z" in the US - and the latter group hasn't even finished being born yet.

https://knoema.com/egyydzc/us-popula...and-generation

[memph]

Originally Posted by CentralGrad258

I will add my 2 cents, being a fan of demography research and a 30 something urban dwelling professional who just had a kid. Yes this is a real thing and I seriously wonder how it will play out against the current trends. After having spent 10 years in a rapidly gentrifying neighborhood adjacent to Philly's downtown, we had to make a decision after my wife got pregnant. We could have stuck around, I would maybe even have preferred it, but the prices had risen dramatically and I really wanted a garage for my bikes.

We ended up in a leafy established neighborhood within city limits, but certainly further away from the action. But the real issue is the schools. Philly school district is a mess and I don't doubt similar problems are faced by other major cities (ours might be worse than most). Many of our friends from the hipster gentrifying neighborhood ended up moving to the suburbs for that reason. There are some that stuck around, got involved in the local public schools and I think that's awesome to see. Even in our new, established middle class neighborhood (lots of professorial types, Bernie stickers) the local public school vary from meh, to pretty bad. You see lots of private school bumper stickers and yard signs. As people my age and younger start having to make those decisions, it will have a significant impact on how well the cities retain their new professional, but mobile residents. And yes, it's a hug co-hort, significantly bigger than the one coming up behind it (kids of Gen-Xers I'm guessing).

If the biggest cohort is still the 20-24 group though, then a lot of those are still living with their parents and looking to move out (probably to the city) so I think we still have at least a few years before demand starts to dampen in any significant way.