Superstar cities can’t grow all the time

London: Like a lot of big cities in the developed world, Amsterdam lost population in the 1960s, 1970s and early 1980s as its inhabitants opted for newer dwellings and more space outside the city.

During those same decades, newcomers arrived in large numbers from former and current Dutch territories as well as Turkey and Morocco. But there weren’t enough of them to make up for the domestic exodus, and their presence led some longtime Amsterdammers to decide the city was no longer for them.

After 1985, Amsterdam stopped shrinking. New arrivals from overseas were still coming, and more and more of them were having kids. Educated young people from elsewhere in the Netherlands began to stream in, too, attracted rather than repelled by the city’s increasingly diverse, cosmopolitan feel, and drawn in by a growing assortment of good jobs.

Starting in 2005, the city began to experience sustained net inflows of domestic migrants for the first time since at least 1950. In 2015, that domestic inflow reversed. By 2018, the net outflows were of a scale not seen since the early 1980s.

Back to full bloom

The inflow from abroad has actually spiked back up recently — albeit from very different places, with UK citizens now the biggest group of foreigners in the city and Italians leading the list of new arrivals in 2018. Together with a big birth-death differential (because of earlier migration patterns, and probably also the insanely steep stairs in older apartment buildings, there aren’t a lot of old people in Amsterdam) this has kept the city growing.

Last November its population hit an estimated 873,200, finally surpassing the previous record of 872,428 set in 1959. But the accelerating exodus to elsewhere in the country seems significant, in part because similar things have been happening in Berlin, London, New York, Paris, Sydney and Toronto. The one exception I found in my admittedly less-than-exhaustive search of what are frequently called “superstar cities” was Tokyo, which is still experiencing big domestic inflows.

Magnets no more

Berlin, London, Sydney and Toronto have, like Amsterdam, continued to grow despite domestic emigration. New York and Paris have resumed shrinking, though, and my sense is that some of the other superstars may follow in their wake before too long. The great rich-world revival of the big city seems to be fading, or at least entering a new phase.

Population outflows from New York, Chicago and Los Angeles have already been getting some attention in the US. Partisan politics often intrude into this discussion, which is one reason it can be helpful to internationalise things. Big cities in other rich countries tend to be run by left-leaning politicians, just as in the US, but more-centralised national governments generally mean that taxes and other policies don’t vary nearly as much between regions.

Other forces must be at work as well.

The focus here is on Amsterdam because I was there last week. Statistics Netherlands reports, for example, that 27- to 40-year-olds with kids have been driving the recent Amsterdam departure wave. Younger Dutch people are still moving to the city, but the supply of those in their early 20s is shrinking, with even bigger declines to come.

Similar demographic trends are at work in most other rich countries, meaning that the prime domestic candidates for moving to superstar cities are getting to be in shorter supply.

They’re also finding it harder to afford housing there. Purchase prices for private dwellings in Amsterdam have doubled just since late 2014.

Muscled out of rental market

Such price increases will be familiar to residents of other superstar cities. They are an indication that this isn’t the 1960s and 1970s all over again — these cities continue to generate good jobs and possess great appeal. But they are also an indication that the superstar city phenomenon has its limits.

It is notable that the one major exception I found to the trend of domestic emigration from superstar cities is Tokyo, which thanks to the Japanese custom of tearing down housing that’s more than 30 years old has seen a lot more new construction than other big cities, and despite average rents that are a little higher than Amsterdam’s offers great price variation among neighbourhoods.

Tearing things down every 30 years isn’t really going to fly in Amsterdam, where much of the city centre dates to the Dutch “golden age” of the 1600s. It remains in that form because over the 150 difficult years after 1700 the city’s population barely budged. From today’s perspective that long depression seems like kind of a lucky break, and while I’m all for cities growing and evolving even I don’t think Amsterdam should fill in its canals to make room for high-rises.

House the talent

One cause of the superstars’ rise has been the increasing economic importance of knowledge work, and the tendency of that work to grow in value the more knowledge workers are crammed in the same place.

By this logic, the best policy is just to encourage the superstar cities to keep growing. A paper by economists estimated that local restrictions on new housing construction just in San Francisco, San Jose and New York had cost the average US worker $3,685 (Dh13,533) in annual wages.

Again, Tokyo’s example seems to indicate that there’s something to this analysis. But in other countries the housing to meet the needs of residents of superstar cities, if it’s being built at all, is generally being built somewhere else.

Those departing Amsterdam usually end up in cities a short train ride away. Most emigrants from London are similarly headed elsewhere in the south of England, those from Berlin to the surrounding state of Brandenburg.

The internet does allow more white-collar workers to do their jobs remotely, though, and in some places they are moving even farther away from superstar cities.

Even at the height of its renaissance a few years back, New York City was experiencing net outflows of residents to elsewhere in the US. To some extent that’s the natural state of big cities, which are prone to migration deficits because they attract young single people and then often lose them after they’ve had kids.

But net migration out of the city more than doubled from 2012 to 2018, according to Internal Revenue Service data. Something is going on, and it’s not just going on in New York.