P.U.M.A. will be periodically providing updates on topics of interest to supplement our Global Trends Report. In our first update, P.U.M.A. intern Liz Munn offers insights into The Rebound Wave: How Millennials Are Driving Growth in Second- and Third- Tier Cities.
College-educated young adults aged 25 to 34 are twice as likely to live within three miles of a city’s downtown core. But the majority of the millennial generation can no longer afford to live near the downtown core of superstar cities. Rising downtown real estate prices in big cities have priced out the very demographic that will be the main driver of economic growth in America. While financial advisers may recommend that 30 percent of income goes toward housing, the current median rent for a one bedroom apartment in San Francisco is $3,595 per month, a rate that demands more than 57 percent of the city’s median household income. In contrast, the median rent for a comparable apartment in Cleveland, Ohio is only $703 per month—only 19 percent of the city’s median household income. This discrepancy is largely due to concentrated increases in real estate prices over the past 60 years. San Francisco’s real estate prices have inflated at twice the national rate since 1950.
Due to exorbitant real estate prices, smaller cities like Oklahoma City and Baltimore are experiencing a rebound wave. They are beating out so-called superstar cities like Boston and New York in attracting 25 to 34 year olds with a college education because their housing prices are affordable. Metropolitan cities like Buffalo, Cleveland, New Orleans and Pittsburgh, who all had negative population growth between 2002 and 2012, experienced gains in their college-educated youth populations during that same time. Millennials migrating to more affordable urban areas present a unique opportunity for second-and third-tier cities to experience long-term economic benefits from the influx of young, college-educated professionals.
Though it may be an initial attractor, housing affordability on its own is not enough to retain Millennials over the long term. Over 61 percent of Millennials have attended college, making this generation the most highly educated in American history. They seek employment that matches their skill set, mainly in service and knowledge economy sectors like science and technology. Smaller cities that have managed to attract new economy anchor corporations have a competitive advantage in attracting – and keeping – millennial talent to fuel their brain gain.
Millennials are also looking for cities that cater to their unique lifestyle preferences. They prioritize walkable neighborhoods and the availability of transit options, especially those that integrate sharing economy services like Uber and bike share programs. Diverse entertainment and social spaces are just as important; Millennials want to feel that they are immersed in diversity, creativity, excitement and culture when they socialize in their neighborhoods.
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