Urbanization has been popular as people move to cities for jobs and as advocates cheer potentially lower environmental impact. That trend may be changing. Whether it has been inspired by the pandemic, tensions in cities, or simply the fact that some trends can’t continue indefinitely, wealthy homeowners are beginning to move out of the biggest cities. Sometimes the move is to smaller cities, sometimes to more remote places. Regardless of why or where, the move of a few percent of the ultra-wealthy has a large effect on city budgets.
“A whopping 80% of New York City’s income tax revenue, according to one estimate, comes from the 17% of its residents who earn more than $100,000 per year. If just 5% of those folks decided to move away, it would cost the city almost one billion ($933 million) in lost tax revenue.” – Bloomberg City Lab
Cities can be caught trying to pay for large projects that were committed to when they had larger budgets. High expenses distributed over a small tax base makes governance more difficult, and potentially impacts the affordability of the remaining population. Ironically, the un-affordability of some cities has been at least partly blamed on the rising demands and lifestyles of increasingly wealthy residents, particularly those who are only part-time residents.
At the other end are the cities that are looking forward to new, richer residents, and the taxes they will pay. This might be one avenue for wealth re-distribution that is not some governmental initiative. In the long term this may be positive. In the short term this may be disruptive, but then, disruption may be the new norm.