New York City Comptroller William C. Thompson, Jr. today issued, “The C-Note,” his periodic column focusing on economic and budget issues affecting New York City. Today’s column is titled: “Trends in City and Suburban Residential Location.”

You can view the column by visiting www.comptroller.nyc.gov and by clicking on the ticker at the top of the home page. In previous weeks, the Comptroller has presented his priorities to help the City weather the storm created by the current economy, provided an outline to better train our future workforce by streamlining the current outdated skills model used by the city, outlined the financial mismanagement in the Yankee Stadium deal, and offered a way for the MTA to help ease its financial problems.

THE C-Note: “Trends in City and Suburban Residential Location”

By William C. Thompson, Jr.

My latest economic report contains a special study, “Trends in City and Suburban Residential Location,” which analyzes how New York City’s income distribution has changed since 1990, when we last confronted a severe recession.  

The report finds that single-person households, higher-income households, and higher income households with children were more likely to prefer living in the city in 2007 than they did 17 years earlier.

What does this mean? The city may be better able to withstand the current recession than it did previous downturns.

Upper-middle and high-income households increasingly have chosen to live in the city, rather than commute, suggesting that New York City may be more resilient to this economic downturn than in 1990. Back then, companies and families were fleeing the five boroughs.

However, not all is optimistic. The analysis shows that middle-income households are dropping as a percentage of all city households, and that families with children, other than those in the highest income group, increasingly favor moving to suburbia.

This gradual decline in the proportion of middle-income households residing in the city raises the prospect of a more economically polarized city.

The report – which you can read in its entirety at http://www.comptroller.nyc.gov/bureaus/bud/Summary_economic_notes.shtm – unearthed a number of trends. For instance, let’s look at several changes in household income distribution from 1990 and 2007:

• Upper-middle and high-income households (over $120,000 annual income) grew from 12.2% of New York City households in 1990 to 15.7% in 2007.
  
  
• Middle-income households ($40,001 to $120,000) in New York City grew in numbers but fell as a proportion of all city households.
  
  
• About 30% of New York City high-income households have at least one earner working in the financial sector.
  
  
• The trend back to city living did not extend to households with children under 18 years old. In every income group but the highest (over $200,000) families with children were more likely to commute to city jobs in 2007 than in 1990.
  
• Both the city and its suburbs experienced growth in the number of households falling into the lower income band.

My office’s analysis found a notable change in the makeup of lower-income households with respect to the number of foreign-born residents. In the city, the share of lower-income households with a foreign-born head rose from 34% in 1990 to 47% percent in 2007.

Increasingly, in both the city and its suburbs, the lower-income population is comprised of immigrant working households.

The report indicated that since 1990, New York City has made inroads in retaining and “recapturing” upper-middle income and high-income households, who in earlier decades had moved to the suburbs en masse.

The reversal of the trend toward greater economic disparity between the city and its suburbs, which had occurred over many decades to the detriment of the city’s social and fiscal stability, is significant.

This shift may have occurred because of an improvement in city services and the overall environment since 1990, a more competitive tax structure, or a renewed appreciation for the advantages of an urban lifestyle.

One concern I raise in the study is whether the financial crisis will undo the improvement that has occurred in the city income structure since 1990.

That’s because households in which at least one member works in the financial sector are disproportionately represented in the city’s high-income families, and their numbers grew rapidly (by 97 percent) since 1990.

However, the number of high-income households in which no finance sector worker was present also grew rapidly, by 74 percent, during the same period.

Higher unemployment and lower earnings will take a toll on households throughout the city in the near term. Public policy has to make sure that this is only a temporary setback, and that the city is positioned to resume its growth once the storm passes.

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