Population and Density – Econlib

Chicago’s population is down about 25% from its peak in 1950. This statement might conjure up images of empty city blocks like you see in Detroit. In fact, Chicago remains quite busy. I can’t find the article, but I remember reading that Chicago now has more households than ever before. The average household size has shrunk dramatically since 1950, partly due to fewer children and more independent living for young adults and the elderly.

The OC register reports some seemingly strange data for California. Housing stock has grown since 2020, the population has shrunk, and yet home prices have soared. This has led to dark conspiracy theories that California has many empty houses owned by speculators, and that this is driving up prices. Not so.

If California’s population is well below its peak and developers continue to build housing, why does the cost of living in the Golden State remain high? . . .

Start with the basics: California had 38.2 million residents living in households last year — that’s a decrease of 375,800 since 2020, or a loss of 0.9%. In the same time frame, California’s housing inventory grew to 14.8 million homes – an improvement of 432,700 since 2020, or a 3% growth.

The puzzle can be solved if we look at the decrease in average household size by almost 4%:

The average number of Californians living in an occupied housing unit was 2.75 last year — down from 2.86 in 2020. That’s not an insignificant change among the 39 million residents.

Why did it happen? There is the pandemic effect of people wanting larger living spaces, often avoiding roommates. Others got historically cheap mortgages in 2021-2022 and don’t want to move, no matter how big their home is for their needs.

Part of this trend may include adult children moving out of the parents’ home – with destinations both within and out of state. Young families also often left for other states. Or they are older residents who lose a spouse.

Whatever the cause, smaller households are gobbling up the housing supply.

Moreover, birth rates are declining.

I believe Kevin Erdmann was the first to document the fact that a booming economy in a market with limited housing development (like LA) leads to population loss as working-class families move to cheaper states and are replaced by younger, childless professionals. Selfish empty nesters like me live in homes that are way too big for our needs. (I remember driving a Chinese visitor through one of the nicer neighborhoods in Newton, Massachusetts in the 1990s. The astonished lady asked how many families lived in each house. I looked at my wife with the look: ‘Who’s going to tell her?’.)

P.S. While Chicago remains relatively ‘full’ despite a 25% population decline; there are rust belt cities that are much worse off. Detroit, Cleveland and St. Louis have seen population declines of 60 to 70 percent, so they have huge areas that are emptying out.