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Out of the city

May 31, 2021
Editor(s): Oliver Soo
Writer(s): Jason Suhartanto, Julia Hu, Yee Xuan

Labelled the ‘urban exodus’, the COVID-19 pandemic has triggered large populations of city dwellers to move to suburbs and regional areas [1]. The Australian Bureau of Statistics reported that Australia’s capital cities saw a net loss of 11,200 people in the September quarter last year, with many moving to regional towns such as Daylesford in Victoria [2]. The US also saw similar trends, with the San Francisco Bay Area seeing net domestic exits increase by 178% when compared to pre-pandemic trends [3].

As the pandemic has forced more businesses to embrace working from home models, more people are taking this opportunity to relocate from their city homes to cheaper, larger, and quieter rural properties. Indeed, camped living conditions, peak hour traffic, and expensive dwellings has been forcing people away from Australian capital cities even pre-pandemic [4]. With housing affordability becoming a key issue for many millennials in major cities, many have turned to regional Australia for their dream homes [5]. Lockdown periods have also exacerbated people’s desires to have closer access to open, natural spaces, such as beaches and hiking trails [6], making rural areas increasingly more attractive.

On the other side of the scale, the wealthy are also fleeing cities. Lockdowns in major US cities has encouraged the move of wealthy residents to their second homes in the Hamptons and Lake Tahoe, with many citing the need to be closer to family [7] and concerns about health [8] as top reasons for the move. While this move is less permanent, the economic effect on the cities that they have left is particularly concerning, with New York City claiming to have lost $133 billion as the ultrarich account for roughly 42.5% of all income tax collected [9]. However, as COVID-19 restrictions continue to ease, the urban exodus is expected to slow down, with trends pre-pandemic expected to return. This suggests that we will soon see a rebound of movement as more people seek to return to the big cities [10].

Before we delve into the factors motivating this exodus, lets explore the idea of the rural-urban gap, which is created by disparities of income, consumption, and other non-monetary aspects of life between the city and rural areas [11]. Government policy plays a key role in influencing the rural-urban gap, however this can prove difficult in practise. In England, the government provided grants to cities based on population size [12]. This sought to distribute funds evenly across all cities, however ended up being biased towards cities located in regional areas. What this policy failed to recognise is that city areas have higher spending on a per head basis than rural areas and are more productive, accounting for a greater proportion of the country’s economic output. Cities attract people around the country for employment opportunities, and draw in tourists, which leads to a high level of demand for services in cities. Hence, England’s proposed policy would result in an ineffective distribution of funds.

Decentralization and rural property policies are another strong influence on the urban-rural gap. These policies [13] emphasise the importance of transferring responsibility from the central government to local governments and setting appropriate tax rates. One example of a decentralization incentive is in New South Wales, where the Regional Relocation Home Buyers Grant provides $7,000 to people who move to regional NSW and buy a new home valued under $600,000, or under $450,000 for vacant land [14]. Additionally, there are a multitude of employment and business subsidy incentives for those wanting to relocate to less populated areas like rural Australia and Tasmania [15]. Internationals can also experience greater migration opportunities if they choose to live in these areas [16]. These plans aim to spread Australia’s population more evenly across the country to stimulate growth in rural areas.

On a personal level, many people are increasingly rejecting the cramped and expensive apartments of the city, especially families. Space in the city is a luxury and a costly one at that, with the standard Melbournian two-bedroom apartment size shrinking down to just 91 square metres at an average rent of $382 per week [17] [18]. Suburban houses on the other hand provide people with an average of 249 square metres at $500 per week average rent [18] [19]. Not only that, but non apartment homes also have privacy benefits as the residents are not packed in with their neighbours immediately surrounding their walls. Additionally, the Covid-19 pandemic is likely a motivator for changes in the rural-urban gap. With the rapid spread of this virus, a world of closeness in a big city no longer seems so attractive. However, there may be other health factors in play.

Cities tend to be noisier and more polluted than their rural counterparts. This can lead to health problems for residents within it. According to World Health Organization, the constant daily exposure to the hustle and bustle of city noise and pollution can lead to potential problems with stress, cognitive impairment, and cardiovascular diseases [20] [21]. While it is always said that the city never sleeps, what happens when you need sleep?

Ultimately, financial benefits and quality of life improvements are the key reasons many are electing to leave the city for rural areas. The coronavirus pandemic has also forced people in urban areas to confront any reservations they had about where they live, further contributing to this urban exodus. It will be interesting to see whether these trends continue or reverse in a post Covid-19 world.


Citations:

[1][2][10] Terzon, E. (2021 February 2). ABS data confirms a city exodus during COVID, with biggest internal migration loss on record. ABC News. https://www.abc.net.au/news/2021-02-02/abs-data-confirms-city-exodus-during-covid/13112868

[3] Parvini, S. (2021 March 4). Californians aren’t leaving the state en masse — but they are leaving San Francisco, study says. Los Angeles Times. https://www.latimes.com/california/story/2021-03-04/california-exodus-san-francisco-migration#:~:text=California-,Californians%20aren’t%20leaving%20the%20state%20en%20masse%20%E2%80%94%20but%20they,from%20the%20California%20Policy%20Lab.

[4][5] Lloyd, M. (2020 June 23). Millennials moving to regional areas, report finds, as housing affordability and lack of commute prove attractive. ABC News. https://www.abc.net.au/news/2020-06-23/regional-australia-institute-millennials-moving-city-to-country/12365964

[6] Hill, A. (2021 February 9). ‘We’re happier, calmer’: why young adults are moving out of big cities. The Guardian. https://www.theguardian.com/world/2021/feb/08/were-happier-calmer-why-young-adults-are-moving-out-of-big-cities

[7] Alexander, S. & Querolo, J.D. (2020 May 21). Young Join the Rich Fleeing America’s Big Cities for Suburbs. Boomberg Quint. https://www.bloombergquint.com/business/young-join-the-rich-fleeing-america-s-big-cities-for-suburbs

[8] Williams, O.A. (2020 July 14). The Wealthy Are Leaving Cities For Good. Forbes. https://www.forbes.com/sites/oliverwilliams1/2020/07/14/the-wealthy-are-leaving-cities-for-good/?sh=3e9650842ece

[9] Kaplan, J. (2020, November 2020). If the wealthiest New Yorkers flee the city, they could take more than $133 billion with them. Business Insider Australia. https://www.businessinsider.com.au/wealthy-new-yorkers-fleeing-city-could-be-big-blow-for-taxes-2020-11?r=US&IR=T

[11] Lagakos, David. “Urban-rural gaps in the developing world: Does internal migration offer opportunities?.” Journal of Economic perspectives 34, no. 3 (2020): 174-92. https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.34.3.174

[12] Swinney, P. (2019, February 26). Is it fair that cities get more money than rural areas?. Centreforcities. https://www.centreforcities.org/blog/is-it-fair-that-cities-get-more-money-than-rural-areas/

[13] FAO LAND TENURE STUDIES. (2004). Decentralization and Rural Property Taxation. http://www.fao.org/3/y5444e/y5444e00.htm#Contents

[14] NSW Government. (2021). Regional relocation grant. https://www.revenue.nsw.gov.au/grants-schemes/previous-schemes/regional-relocation-grant

[15] Australian Government Department of Health. (2021). Workforce Incentive Program. https://www.health.gov.au/initiatives-and-programs/workforce-incentive-program

[16] Parliament of Australia Department of Parliamentary Services. (2019, September 29). Migration in Regional Australia Submission to the Joint Standing Committee on Migration. https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/1011/AustMigration

[17] Ryan, E. (2018). URBAN GROWTH & APARTMENT SIZES IN MELBOURNE. Bruce Henderson Architects. https://www.bh-architects.com/urban-growth-and-apartment-sizes-in-melbourne/#:~:text=The%20new%20standard%20sets%20the,apartment%20at%20148%20square%20metres.

[18] (2021) Weekly Rents, City: Melbourne. SQM Research. https://sqmresearch.com.au/weekly-rents.php?region=vic-Melbourne&type=c&t=1

[19] Australian houses are world’s biggest: CommSec Home Size Trends Report. (2020, November 9). Commonwealth Bank of Australia. https://www.commbank.com.au/articles/newsroom/2020/11/commsec-home-size-trends-report.html#:~:text=Of%20all%20homes%20(houses%20and,)%20and%20Victoria%20(217m%C2%B2)

[20] World Health Organization. (n.d.). Burden of disease from environmental noise Quantification of healthy life years lost in Europe. https://www.who.int/quantifying_ehimpacts/publications/e94888.pdf?ua=1

[21] World Health Organization. (2018, May 2). Ambient (outdoor) air pollution. https://www.who.int/en/news-room/fact-sheets/detail/ambient-(outdoor)-air-quality-and-health

The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ, our Partners and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.

Meet our authors:

Oliver Soo
Editor

Oliver is a second year Bachelor of Commerce student. He is interested in business, politics and science and hopes to improve his written communication skills by writing for Cainz Digest. When not focusing on Uni commitments he is either digesting world news, participating in some form of sport or reading a book.

Jason Suhartanto
Writer
Julia Hu
Writer
Yee Xuan
Writer