Has New York City Recovered From the 1970s? Quality of Life

In the past few posts I’ve examined whether New York City has recovered from the 1970s based on employment, income and poverty.  But a dollar of income doesn’t buy the same standard of living everywhere in the U.S., because the cost of living, and particular the cost of housing, varies.  In 1982, according to the Bureau of Economic Analysis, per capita income in the New York metropolitan area was 22.3% above the U.S. average, but according to the National Association of Realtors the median existing home sales price was just 4.0% above the U.S. average.  Although New York area homes tended to be older and smaller, that could be described as a pretty good deal.

In 2011, the per capita income in metropolitan New York had increased to 36.6% higher than the U.S. average, but that doesn’t necessarily mean that the standard of living is relatively higher, because the median existing home price as 127.9% higher than the U.S. average. Rents are up too.  For those who did not buy homes or get rent regulated apartments before housing prices soared, the personal standard of living has clearly gone down.  Many young and immigrant renters are forced to live several to a room, and many buyers are “house poor.”  That is the bad news.  And, according to one theory, also the good news.  Since there must be some reason people are flocking to an area where housing is so expensive relative to income, and that reason might be a high quality of life.

Before we talk about the theory, let’s look at the metro New York median existing home price home price history, in this spreadsheet left over from my Department of City Planning days and partially updated. 

NARDATA

From around the national average in 1982, the cost of New York area houses soared to 114.4% above average in 1987 as part of a bicoastal housing bubble in the Northeast and California.  That bubble popped and the inflation-adjusted home price fell sharply from 1987 to 1997, when the median existing home price was 46.6% above the U.S. average in the New York area, and per capita income was 32.3% above average.  Lots of people my age got hosed in the 1980s when they felt pressure to buy something, generally a condo, before prices got out of reach.  I figured a hard lesson had been learned and this would not happen again.

Instead, we got a massive housing bubble across the whole country exactly 20 years later, one that manifested itself as a price bubble in some places, a new housing construction bubble in other places, and a price and construction bubble is a few places such as South Florida and metro Phoenix.  While home prices have fallen from the insane bubble peaks, however, they have fallen faster in other parts of the country than they have in metro New York.

As a result housing has become much more expensive in metro New York compared with the rest of the country, a difference that is in no way offset by the higher average income here.  And within metro New York, housing has become more expensive in areas close to Manhattan, or rail transit stations that provide a link to Manhattan, compared with more suburban and exurban parts of the region.

Now to the theory.  You may have heard of the “Places Rated Almanac,” originally published by Rand McNally.  Starting in 1981, this document purported to identify the best places in the U.S. to live based on nine categories: housing affordability (cost of living); transportation; jobs; education; climate; crime; health care; recreation; and ambience (museums, performing arts, restaurants and historical districts).  When the numbers were crunched, the original winner turned out to be Pittsburgh, Pennsylvania, a place in deep industrial decline that was losing people in droves at the time. “I guess they are somewhat subjective,” the author who still publishes the document annually, said of his quality of life ratings in an article a few years ago. “In a sense that I try to imagine what people ought to be looking for. Low housing costs and lack of crime and more things to do. I think people would agree that these are good, valid ways of measuring metropolitan areas.”

http://www.post-gazette.com/stories/local/neighborhoods-city/pittsburgh-rated-most-livable-once-again-482607/

Actually, many people did not agree.  According to an article by a city planner I read many years ago (can’t find it but I remember it) the “Places Rated” methodology confuses one’s personal standard of living – jobs, pay and housing costs — with the quality of life. And the measurement of the “quality of life” factors is subjective indeed, since different people prefer different climates and natural amenities, and some people might consider a symphony orchestra a big part of the quality of life, others might be more interested in parks, other in schools, and still others in sports teams.

The quality of life, according to this concept, is the benefit one receives just by being in a particular place – the natural and cultural amenities, public services and facilities, fun, excitement and opportunity.  Not how big one’s own house is, and how much you can afford to spend at the mall, which are part of the standard of living.

What the planner proposed to do is measure quality of life indirectly, by measuring the standard of living – income vs. housing prices.  If people were moving to a place where they would be forced to accept a relatively low standard of living, according to the theory, a high quality of life must be attracting them here.  And if employers had to pay a relatively high wage relative to housing prices to get people to live in an area, the quality of life must be rather low.

In this analysis, the highest rated places turned out to be resort and recreation areas like Aspen and Boulder Colorado, Cape Cod and the Florida Keys.  People were willing to work in the low wage service jobs typical of such areas, and pay a great deal for housing, to live in such high amenity places.  The lowest rated places turned out to be Midwestern industrial cities, which still had relatively high wages at the time but also had modest housing prices.  New York’s quality of life was held to be average, with high housing prices balanced by high income.

For the purpose of this post I’ve redone the analysis for all the metro areas for which the National Association of Realtors produced median existing home sales price data for 2012, and compared it with median household income data for 2011 from the American Community Survey.  The data is here.

Metro_Area_Home_Prices_and_Income

According to the NAR, the median existing home price was $176,900 last year, 3.5 times the median household income of $50,502 as measured by the ACS.  The place with the highest ratio at 9.5, and therefore the highest cost of living relative to income and in theory the highest quality of life to make up for it, was metro Honolulu, Hawaii.  Other high quality of life places include Barnstable Town, MA on Cape Cod, Boulder, Colorado, Burlington, Vermont, and Charlestown South Carolina.  The worst quality of life is metro Detroit, Michigan, with a median housing price to household income of 1.3, with metro Toledo, Ohio; Decatur, Illinois and Atlanta, Georgia rounding out the miserable four.

But some larger metro areas are also right near the top.  In fact, the New York metropolitan area, according to this theory, has the fifth highest quality of life in the United States, between metro San Diego and metro Los Angeles.  Does metro New York’s high quality of life make more sense than Pittsburgh, which was always highly rated in the “Places Rated” methodology?  More to the point, is it reasonable to believe that the quality of life in New York City has recovered from the 1970s?

One key aspects of New York have clearly recovered from the 1970s, the subway system.    idership on the subways is the highest it has been since the onset of mass automobile ownership, the trains are relatively clean and air conditioned, and the extent of unplanned travel delays is certainly far diminished from the bad old days.  I say this speaking as one who remembers them.

This improvement may be key to the city’s huge popularity, because walkable places that have quality mass transit have become relatively scarce, as noted by this article.

 http://www.multifamilyexecutive.com/development/next-stop-home.aspx

“Development sites in transit zones have become the new beachfront property: prized, scarce footage with scant new supply” according to this source.  “In a majestic country of some 2 billion acres, talk of any land supply shortage might seem a little premature. But even allowing for a modest increase in stations, only 300,000 of those two billion acres are within walking range of rail transportation. And with many of those acres already built-up, undevelopable, or devoted to untidy necessities like parking, development land in transit station zones has become highly desirable, very rare, and extremely expensive.”

Not everyone wants the urban lifestyle.  According to one study, “within 20 years, 15 million American households will want homes within walking distance of mass transit.”  There are 100 million households in the country.  But most older urban centers that have transit collapsed socially, economically and fiscally in the mass suburbanization era, increasing the demand for the limited number that remain.

Another part of the urban lifestyle is public gathering places, recreation and events.  In affluent areas where private contributions are available, New York City’s parks have indeed recovered from the 1970s, when they were dangerous and in disrepair.  More recently new parks such as the High Line have and the Hudson River Park have been added, and New Yorkers were rediscovering the city’s beaches before Hurricane Sandy.  New York has Broadway and sports teams of course, but for those with less money there is a now huge variety of free and near-free entertainment and events, particularly in summer.  And while shopping was limited in many areas of the city after retailing followed the middle class to the suburbs, New Yorkers have less need to drive to the suburbs to buy things than they did 20 years ago.

One thing that diminishes the value of street life, parks and mass transit is crime and the fear of crime.  By 2005, however, New York City’s overall crime rate as measured by the Uniform Crime Report was well below the national average.  The city was never as dangerous as some perceived, with some forms of property crime and rape always relatively less common here.  And in 2005 New York City’s violent crime rate of 673 per 100,000 people was still higher than the U.S. average 469, thanks to the one crime were the city has always really stood out – robbery.  But NYC’s overall property crime rate was just 2,002 in 2005, compared with 3,430 nationally. And its murder rate was just 6.6, little different from the 6.0 average.

The transit system, the parks and streetlife, and safe streets – these are the quality of life amenities that attract the young to New York City.  For middle aged parents the situation remains different, as the city’s schools have not recovered from the 1970s.  And after a huge increase in funding went almost exclusively to enriched retirement benefits, it is very, very doubtful they ever will.

Moreover, there is every reason to believe additional aspects of the low quality of life in the 1970s will return.  As the city has been restored physically, it has been degraded financially by soaring debts used for operating expenses and retroactive pension enhancements, revenues advanced or encumbered and costs deferred.  The same policies that, when pursued by a prior generation that was cashing in and moving out, led to 1970s quality of life disaster.

As a result despite record employment and stock prices, city residents are facing a seemingly interminable series of tax increases and service cuts.  The mass transit system, encumbered by massive debts used mostly for past maintenance and ongoing replacement and not expansion, is particularly at risk.  The city’s libraries, in fact, had only recovered from the 1970s, with five days per week service, for one year before they were cut back again.

There is, however, another aspect of quality of life that is drawing people to New York, to Los Angeles, to San Francisco and the Silicon Valley.  Income inequality.  Not that people want to be near the poor, and neither is the poverty rate all that high at the metropolitan level for the metro areas with high housing price to median income ratio.  Rather, people are attracted to concentrations of the affluent, and to the places where the most people have an opportunity to achieve fame, fortune, or high accomplishment.  The places were, in the phrase used by teens and twenty-somethings, you can “get a life.”  New York is one of those places.  The rest are also high on the list of housing prices relative to median income.

Some may recall the words of a popular song from 1968, when Los Angeles was the hippest place in the U.S. for people to move to.

LA is a great big freeway.  Put a hundred down and buy a car.  In a week, maybe two, they’ll make you a star.  Weeks turn into years, how quick they pass.  And all the stars that never were are parking cars and pumping gas.

Or working in food service establishments and living four to a room somewhere in Brooklyn.

“Fame and fortune is a magnet.  It can pull you far away from home.  With a dream in your heart you’re never alone.  Dreams turn into dust and blow away. And there you are without a friend. You pack your car and ride away.”

The anti-New York backlash is bound to happen sooner or later.  We certainly benefit from the work and creativity of all the dreamers who flood in from elsewhere.  But most keep chasing a carrot that is always pulled a little further away.  Until they realize the life they are going to get is not what they hoped.

Some of New York City’s low standard of living is offset by a high quality of life.  But as it keeps getting lower, as wages fall and rents and housing prices rise, the low standard of living shouldn’t be simply dismissed.  Particularly when the city government will be hard pressed to merely slow the deterioration of the quality of life, thanks to the future selling decisions of the past 20 years.

Not everyone is faced with this low standard of living. Those who bought homes before the price of housing exploded, who obtained rent regulated apartments years ago, who gained access to subsidized and public housing, have a high standard of living to go along with the improved quality of life.  But the dreamers arriving from all over the country, and all over he world, aren’t in on those deals. And they rely on the public services, benefits, and amenities whose future has been encumbered by deals for those cashing in and moving out.

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One thought on “Has New York City Recovered From the 1970s? Quality of Life

  1. larrylittlefield Post author

    One more note. Back in my City Planning days, I was asked to contribute to the Planning and Zoning report. At the time (early 1990s) some were arguing that since the city’s population and job base were stagnant, all additional development should be prohibited, since that would just make existing buildings less competitive. I argued that New Yorkers were already forced to use space more intensively that other Americans, at work and at home, and the city required “qualitative growth” to catch up.
    Well we’ve had a big boom in population and employment, without nearly as much expansion of the transit system, the housing stock or, in particular the amount of office space. College-educated professionals are now getting squeezed in the way clerical workers were before the advent of office automation, and look back with longing to the days of the cubicle. I guess you could say that is “qualitative decline.”
    This follows a period of growing excess in the other direction. I’ve run across quite a few obsolete 1 million-square-foot enclosed shopping malls built in the 1970s that have been sold for $2 per square foot. What is the best adoptive reuse of such malls? Given the taste and preferences of many affluent Americans in recent years, probably a one-family home.

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