Grand Rapids and Austin: seeking inclusive, equitable growth

On Oct. 16, we welcomed to Austin a group of community leaders from Grand Rapids, Mich., and presented a glimpse at some of the key trends, opportunities, and challenges facing the two cities. I did a similar presentation for another Grand Rapids cohort four years ago, so it was a welcome opportunity to see a few familiar faces and check the data to see what’s changed.

On the surface, it would appear that Austin and Grand Rapids don’t have that much in common. Austin is a much larger, wealthier, and more expensive market. Both regional economies are growing, but Austin is growing at a much faster rate. The two cities have at least one critical economic driver in common, but for the most part have different industrial structures.

Yet, Austin and Grand Rapids share one key trend that continues to shape opportunities and challenges in both communities: highly educated people. Four years ago, the Grand Rapids area enjoyed the second-fastest growth rate among large metros for people (age 25+) with at least a bachelor’s degree.* Austin ranked fourth at the time. Since then, Grand Rapids has taken over the top spot – the number of Grand Rapids residents (age 25+) with any completed post-secondary degree increased 75% from 2010 to 2018, according to Census estimates. The bachelor’s-plus cohort has grown 81% (compared with 58% in Austin).

A rapidly expanding base of human capital provides a significant boost for economic development and is a major factor in each city’s competitive advantage. But the wage premium paid to highly educated workers also puts upward pressure on housing costs and, as a result, usually exacerbates inequality between people who can afford to keep up with rising costs and those who can’t.

Putting that in the context of affordability some of the challenges of inclusive and equitable growth become clear. Average rents in both cities now exceed what a person making the average earnings per worker can reasonably afford across all race/ethnicity groups except Asians and Whites. (Affordable is defined here as spending no more than 30% of earnings on housing.) The average earnings for African-American workers in Kent County, for example, would allow them to afford about $960 in housing costs per month. That’s $100 less than the current average rent of $1,060 per month for all multi-family listings in Grand Rapids and about $400 less than the average monthly rent for all housing types, according to Zillow Research. Given the higher wage premium in Austin, combined with the substantial differences in educational attainment rates across race/ethnicity groups, the affordability gaps in Austin are quite a bit larger than in Grand Rapids.

And that’s the story behind the title I used for the talk: What can community leaders from two economic success stories do together to promote inclusive/equitable prosperity? Grand Rapids has an advantage compared to Austin, because its population is growing at a slower pace—there is, hopefully, time and bandwidth for leaders there to develop strategies that can address what is surely coming (absent a serious recession or something else fundamentally changing the city’s trajectory).

Human capital attraction and development is a good problem to have, of course, given the alternative. But, as Austin can attest, community leaders in Grand Rapids should be attuned to the challenges it presents—and start working on solutions now.

You can download a copy of the slides here.

(* Large metros are defined here as 500,000 or more people)

The aggregate impact of aggregates in Central Texas

The Austin American-Statesman recently published an interesting feature story on the economic, social and environmental impacts of the aggregates industry in Texas. Aggregates here refer to operations that quarry and process rock, sand and gravel. This particular section caught my attention:

“The aggregates association estimates that its members pump more than $4.8 billion annually into the Texas economy and that a single job at one facility supports nearly five outside jobs such as equipment manufacturing, sales and servicing.”

Those talking points are from the Texas Aggregates & Concrete Association. I tracked down the economic impact study that generated those statewide statistics and replicated the methodology for the ten-county service area of the Capital Area Council of Governments. The statewide study was completed by a think tank called the Phoenix Center, based in Washington, DC. The center used an input-output model developed by Emsi, a respected labor market analytics firm, so I used the same model to produce estimates for the ten-county Capital Area region—not so much as a fact-check on the Center’s work, but more for local context to complement the Statesman story. As these things go, the Phoenix Center’s study is well done, uses a widely accepted methodology and sound data, and it includes the necessary qualifiers. No gripes here about their work, given the scope.

But local data is preferable to statewide data, especially for controversial topics, and I’m guessing the Statesman story might have prompted a few calls to elected officials in the Hill Country. So here’s what I found in terms of the economic impact of the aggregates industry, as defined by the Phoenix Center, in the Capital Area region:

  • Nearly $100 million in value added to gross domestic product (GDP)

  • Approximately $49 million in direct earnings

  • 481 jobs (full-time and part-time)

  • More than $6 million in tax revenue

The factors used to calculate the ripple effects of jobs and economic impact deserve a fair bit of skepticism, but let’s be consistent and use the “multipliers” from the Phoenix Center study. Each job in the aggregates industry in the Capital Area supports somewhere between 1 and 1.5 other jobs in the overall economy through indirect and induced activity. Stated differently, get rid of all the jobs in the aggregates industry in the Capital Area region, and the entire economy would lose an estimated 1,500 jobs and $95 million in earnings.

That’s only a fraction of the $4.8 billion estimated impact on Texas statewide, but it’s certainly nothing to sneeze at, either. It’s fair to say the aggregates industry provides a boost to the regional economy, even if – as the Statesman notes – that’s only one part of the story.

Is gentrification contributing to labor shortages for small businesses in Austin?

Chris Strader at Conan’s Pizza is having trouble filling job openings, according to a recent story in the Austin American-Statesman. As a small business owner in a fast growing economy, Chris is probably not alone: the unemployment rate in Austin has been under 3% for 20 of the last 24 months. But to what extent can Chris’ hiring difficulty be attributed to “macro” trends in the local economy versus something happening at a more “micro” level? Is gentrification, for example, contributing to a labor shortage for restaurants like Conan’s?

Let’s look first at the workforce situation. There are about 34,000 residents of the city of Austin age 16 or older working in food preparation and serving occupations, according to the latest available estimates from the Census Bureau. With median annual earnings of about $19,800 these workers are among the lowest paid in Austin. However, wages in those jobs are up due to a combination of very low unemployment in the local economy and increasing demand for workers due to the growing number of restaurants and bars—Travis County is averaging nearly 70 new eating and drinking businesses per year, according to data from the Texas Workforce Commission. Real (inflation adjusted) earnings for Austin residents age 16 or older working in food prep and serving have been growing at about 2% per year, which is not much but does rank among the top-tier of occupations based on the rate of growth.

So, yes, economy-wide and industry-specific conditions are, undoubtedly, having an effect on labor availability at Conan’s and other small businesses in Austin. But what other factors could be at play?

Conan’s is located in 78757 at the intersection of Burnet and Anderson. I think most people familiar with the area would agree that, despite a few notable new tenants, commercial development looks roughly the same today as it did 15 years ago. Retail and food services have gained a few percentage points in share of total employment, and, like most places, there are more people working in professional services today. But the structure of the local economy has not changed much. According to data hosted by the Census Bureau, total employment within a one-mile radius from the Burnet/Anderson intersection in 2017 was not much different than what it was in 2002. It dipped temporarily during the recession, but for the most part has ranged between 11,000 and 12,000 jobs. The employees in those jobs today are, on average, older and more diverse than they were before, but nothing in the publicly available data stands out as differentiating trends in the Burnet/Anderson area from Austin overall.

That is, until you look at where those employees are coming from. The folks at Conan’s would have to weigh in on how much they’ve been able to rely on Allandale, Crestview and other surrounding neighborhoods for employees over the years, and whether or not that has changed recently. But my guess is, it has. In the years leading up to the last recession, households in the immediate labor market area—defined here as 78731, 78752, 78756, 78757, and 78758—supplied an average of about 1,300 employees to businesses located within a one-mile radius from the Burnet/Anderson intersection. By 2017, that number was down by 14%, equivalent to nearly 180 fewer employees drawn from those surrounding neighborhoods. That might not sound like much in the context of 11,000 or 12,000 total jobs, but for a small, long-time neighborhood business that needs to hire just a few more employees, like Conan’s, it could be quite significant.

Indeed, employers in the Burnet/Anderson area are increasingly dependent on workers commuting from greater distances. In 2002, 48% of employees working within a one-mile radius from the Burnet/Anderson intersection lived less than 10 miles away. By 2017, that was down to 42%. For industries with larger percentages of younger, lower-wage employees—the median age for food prep and serving workers is under 30—longer commutes could certainly be contributing to labor force availability challenges. With the increasing demand for workers from the 70 new restaurants and bars every year in Travis County, why sit in traffic and incur higher costs for commuting to a job in the Burnet/Anderson area if I have another comparable option closer to home? Here’s a map of the five neighborhoods sending the greatest number of workers age 29 or younger to the Burnet/Anderson area in 2002:

2019-09-04 Home locations of 29 and under workers in 1-mile radius of BA intersection top 5 CTs 2002.png

Here’s that same map in 2017:

2019-09-04 Home locations of 29 and under workers in 1-mile radius of BA intersection top 5 CTs 2017.png

In the Statesman story, Chris mentioned that half of the applicants who respond to interview requests for jobs at Conan’s don’t show up. Perhaps they’re stuck in traffic.

Is demand for housing in Austin really increasing by 150 people per day?

As reported in the Austin Monitor, Mayor Pro Tem Delia Garza offered the following assessment of the local housing market during a recent discussion about Austin’s land development code rewrite:

“…the city’s population is growing faster than new housing supply, driving up both demand and costs. With demand steadily increasing at around 150 people per day, she said, the way to see prices go down is to build new housing fast enough to meet that demand.”

Measuring housing supply and demand is extremely complicated, and it’s becoming increasingly contentious in fast-growing cities grappling with escalating costs, gentrification, and displacement. Politics can explain a portion of the controversy, but limitations of publicly available data—margin of error, time lags, geographic specificity, to name just a few—are far more important to understand as we strive for a “common set of facts” to guide community discussion and policy making.

The underlying challenge for analysts is the dynamic nature of housing markets. Changes in population and housing are constantly fluctuating nominally and spatially. People are born, they die and they move. New homes are permitted, built, and occupied. And thousands of people from around the country view real estate listings online, thereby influencing the perceived value and various local market conditions in rapidly growing cities like Austin. Publicly available data simply cannot keep up.

So until some clever technologist figures out how to accurately track those dynamic changes—likely through means I don’t want to know about—we will continue to be frustrated by our inability to accurately measure true supply and demand in local housing markets. But for the purpose of informing public debate and policy making it’s important to figure out what we can know with a reasonable degree of confidence, what we can’t know given currently accessible data, and what is probably impossible to know.

First, let’s deal with the Jason Voorhees of local sound bites about population growth that, according to Garza, could be impacting housing demand—is it “steadily increasing at around 150 people per day?” Here’s what we know from publicly available data: The U.S. Census Bureau estimates that Travis County’s population has grown by an average of 16,750 per year, or 46 per day, since 2010 due to net migration, or people moving in minus people moving out. For the metropolitan area, it’s nearly 39,000 per year, or 106 per day. Unfortunately neither estimate addresses net migration to the city of Austin, specifically. Nor do we know how to group those net new residents to Austin into households in order to properly estimate the impact on demand—one net new resident, of course, is not necessarily equivalent to one net new housing unit demanded. People live in families, and children do not purchase or lease homes.

So where does that leave us in terms of Garza’s claim about the 150 people per day? We do know from another census estimate that total population growth in the city of Austin has averaged nearly 20,000 per year since 2010, or about 54 per day, which is helpful context—and, notably, many fewer than 150 or even 100 people per day—but not very useful for estimating demand for housing units, primarily because the Census Bureau uses housing unit data to derive that figure from county-level population estimates.

But there’s another, more fundamental problem here, and it has very little to do with data issues. While it’s important to understand what data can and cannot tells us, it’s more important to understand what users of that information—residents, advocates, policy makers—are really asking or want to know. Garza’s point, I think, was less about aggregate demand, in which case 150 per day might be the relevant statistic even if it is overstating the matter, and more about demand in a certain segment of the market. To put it in my own words, is supply increasing fast enough to stabilize prices for the most price-sensitive people in the Austin housing market? That’s a different, and potentially better, question that can tell us something meaningful about affordability and equity in Austin.

Of course, it’s also much more difficult to answer convincingly, and not just because of the standard data issues outlined above. For example, existing publicly available data is silent on one of the most important puzzles to sort through when it comes to affordability: How many people want to live in the city of Austin but for whatever reason choose to live somewhere else, whether that’s elsewhere in Travis County, in an adjacent county or someplace else entirely? To be clear, displacement is occurring in Austin due to the rising cost of housing; that is an undeniable fact. But, it’s tempting for some participants in this debate to characterize development and population growth in suburban areas outside Austin city limits – and even those who oped to locate in nearby cities within the region – as would-be Austin residents who were “priced out” and, consequently, had to settle for another location. That’s an overstatement, at least for people lacking primary data on why exactly those residents opted to live outside Austin.

Consumer preferences present another dilemma. There are not many clear substitutes for housing, so you can’t treat it like a typical good. Despite what some participants in the debate might contend, it’s not merely a factor of “supply and demand.” Preferences are important. For example, let’s assume a three-person family looks at two homes of equivalent cost – a two-bedroom on a small lot in Austin, and a four-bedroom on a larger lot in Pflugerville. Say they choose the home in Pflugerville. Is that evidence of an affordability problem in Austin? Has that family been “priced out” of the Austin market? Perhaps our hypothetical family also considered a three-bedroom rental home in Austin they could afford, but they preferred to own a home, and that was the deciding factor in favor of Pflugerville. How do we account for ownership preferences when trying to estimate the number of housing units needed based on population growth, especially when the stated policy goal for many people is “housing?”

The opportunities for more research in this area are immense. Academic researchers in Austin are already making progress using surveys and interviews to sort through issues that can’t be addressed satisfactorily with existing, publicly available data. We hope to contribute more to our body of knowledge on this topic in the months to come.

Job growth in Travis County is outpacing every other large county except for San Francisco

Economic growth continued at a healthy clip in Travis County in the first quarter of 2019, according to new data released last week by the Bureau of Labor Statistics.

Among large U.S. counties with total employment of 500,000 or more, Travis County ranked second with 3.5% year-over-year (YoY) job growth in March. San Francisco was first at 3.9%. Travis County turned in its best YoY March performance in four years and extended a streak of six consecutive months at 3.5% or better. Despite signs that job growth may be slowing regionally—the metropolitan area is averaging only 2.2% YoY growth so far in 2019, according to a different survey—Travis County’s economy appears to be slightly ahead of where it was a year ago, at least according to payroll expansion. Rounding out the top five were Davidson County (Nashville) at 3.4%, Clark County (Las Vegas) at 3.1%, and Salt Lake County at 2.9%.

The average weekly wage in Travis County in the first three months of 2019 was $1,365, up 3.6% from the first quarter of 2018. That ranked in the top fifteen among large counties. San Francisco County was first at 10.2%, followed by Hamilton County (Cincinnati) at 5.9%, King County (Seattle) and Middlesex County (Boston area), at 5.4%, and Wake County (Raleigh) at 5.3%. Annualized average wages among large counties in the first quarter ranged from approximately $151,000 in New York to $45,000 in Riverside. Among large counties in Texas, Travis County’s annualized average wage of about $66,000 trailed Harris County ($75,000) and Dallas County ($70,000), but surpassed Tarrant County ($55,000) and Bexar County ($49,000).

For context, a household in Travis County with one worker earning the average weekly wage of $1,365 can afford monthly housing costs (including utilities) of $1,638. In March, the average rent in Austin, according to Rent Jungle, was $1,546 per month for all advertised units; $1,703 for two-bedroom units.

The diverging trajectories of the regional (MSA) and local (county) economies in Austin is an interesting puzzle. It could be nothing more than a data issue—the estimates generated by the survey suggesting a slowing regional economy are based on a much smaller sample. Alternatively, it could be a signal worth paying attention to, possibly indicating a turn in the business cycle or change in development patterns. We’ll find out more when new metro area data is released later this week.

Here's to a more data-driven Austin

Welcome to the Capital of Texas Media Foundation’s research blog. We will eventually have a dedicated site for the new think tank, but for now we’ll post content here on the blog.

Here’s what you can expect to find:

  • Timely analyses of newly released public data about Austin’s economy, labor market, and population, usually once or twice a month;

  • Brief commentary on newsworthy events, civic debates and emerging issues, focusing on point where data can be deployed to inform community decision-making;

  • Periodically, longer-form discussions of special topics as they capture our attention – or yours.

We will also post updates on development of the think tank, and we look forward to your feedback. You can reach research director Brian Kelsey at brian.kelsey@cotmf.org.

Thanks for reading.