New York has lost 5% of its population and $3.7 billion per year in state income since the start of 2019. The downstream effects of this are enormous.
Everything from real estate markets to housing costs have been thrown out of whack. Businesses are relocating, or shuttering downtown offices, and confidence in America’s economic powerhouse, NYC, and Wall Street are declining.
On a practical level, the reduction in state income can only mean future reductions in state spending. But what do you cut first? Affordable housing continues to be an issue, especially if you’re a renter. Mass transit and proper infrastructure are essential, as is investment in well-paying job creation.
While the state is required to address these challenges of the exodus, its private capital and industry that will likely determine its opportunities. With this in mind, there is still much to recommend a move from New York, and lots of people with money still seem to be heeding the call midway through 2023.
Let’s begin our analysis with a look at the top line numbers for population flow and the resulting impact on state income in New York.
$3.7 billion in annual state revenue lost, mostly in NYC
New York City’s contribution to the Empire State’s losses can not be understated. Nor should they be for the purposes of understanding the broader impacts to New York state’s economy, which is getting hammered as of Q2 2023.
1,000,239 people left New York state in the period we examined, ending Q2 2023. The one million figure is more significant in New York because it represents a full 5% of the former population — an enormous hemorrhaging of people and associated revenue.
At a median average income of $75,157 and more than 1 million in population loss, greater than $75 billion in income has left New York state.
At an average income tax loss per year of $3,715 per person, that means New York state’s total revenue loss due to population outflow since 2019 is now more than $3.7 billion annually.
New York Exodus Economic Impact on State Revenue
The hit to the state economy is big, but it’s also a pretty concentrated blow. New York County itself, a.k.a. ‘The City’, accounts for 30% of ‘people’ losses — but at a price per head 20% higher than the state average. Collectively, New York City, Kings and Queens total about 62% of the total population loss, and also about 62% of the hit to state income tax.
The Bronx is losing people, but is less impacted on the economic balance because those backfilling the county are making about twice as much money as those who left. Therefore, the $88 million in lost revenue is bridged based on a higher effective income tax rate, which will recoup losses over the coming years.
Beyond income tax revenue, the significant population loss in and around New York City is having a profound economic impact on the entire state, specifically in the areas of:
- Business Exodus: As people and businesses leave the city, it can create a ripple effect, causing companies to relocate their headquarters or operations to other states with lower costs. This shift in business activity can lead to a loss of jobs and tax revenue for the entire state.
- Real Estate Market Impact: New York City’s real estate market is closely tied to its population density. The exodus of residents leads to a surplus of available housing, leading to declining property values and impacting the real estate market throughout New York state.
- Consumer Spending Reduction: As residents leave and tourism declines due to the city's population decrease, consumer spending decreases, affecting businesses across the state that rely on New York City’s economic activity.
- Employment Challenges: As people leave the city, the labor pool decreases, leading to potential labor shortages in various industries across the state. Especially as skilled workers and professionals relocate to other states.
- Transportation and Infrastructure Impact: As the population decreases, it can lead to reduced ridership and funding challenges for maintaining and upgrading public transportation infrastructure, which can affect commuters and the state's overall transportation network.
- Economic Confidence: The exodus of people from New York City can create a perception of economic instability and uncertainty, affecting investor confidence and business decisions throughout the state. This could lead to reduced investments and slower economic growth.
- Public Perception and Image: New York City’s population decline can affect the city's image and reputation, potentially impacting tourism and business partnerships. This can have repercussions for the state's economy as a whole.
When people leave New York state, they seem to like to go somewhere warm. Florida, California, Texas, Georgia and North Carolina are among the top outbound destination points. Closer options include New Jersey, Pennsylvania, Connecticut and Massachusetts.
Besides the weather, there are several reasons why people leaving New York State might choose these specific destinations to move to:
- Lower Cost of Living: States like Florida, Texas, Georgia, and North Carolina generally offer a lower cost of living compared to New York. This includes lower housing costs, taxes, and overall expenses, making it an attractive choice for those seeking more affordable living options.
- Retirement Destinations: Florida, in particular, is a popular retirement destination due to its warm climate, recreational amenities, and favorable tax policies for retirees.
- Quality of Life: Some of these states, like California, offer a high quality of life with access to beautiful landscapes, outdoor activities, and cultural attractions. Each state offers a distinct lifestyle and cultural scene, appealing to individuals with various interests and preferences.
- Business Opportunities: States like Texas and California are known for their business-friendly environments, attracting entrepreneurs and professionals looking to start new ventures or join established companies.
- Tax Benefits: Certain states, like Florida and Texas, have no state income tax, making them attractive choices for individuals seeking to minimize their tax burden.
- Proximity to New York: States like New Jersey and Connecticut offer the advantages of being close to New York City, allowing people to stay connected to the city's opportunities and amenities while benefiting from a potentially lower cost of living.
- Urbanization and Gentrification: Gentrification is taking place in many of these trending neighborhoods, leading to an influx of wealthier residents who can afford higher living costs. This is exactly what is happening in Brooklyn.
Overall, people choose these destinations based on a combination of factors that align with their personal preferences, lifestyle needs, career goals, and considerations beyond just cost of living or the weather.
Summary
This blog post discusses the significant population decline and economic repercussions that New York state, particularly New York City, has experienced since the beginning of 2019. The state has lost 5% of its population and $3.7 billion in annual state income due to this exodus. This has had widespread effects on various aspects of the economy and society.
New York City accounts for a substantial portion of the population loss and economic impact, with over 1 million people leaving the state by Q2 2023. The average median income per person is $75,157, leading to a significant loss of income tax revenue. The financial implications include a yearly income tax loss of $3,715 per person, resulting in a total annual revenue loss of over $3.7 billion.
The economic consequences are concentrated but significant. The City (New York County) alone represents 30% of the population loss, and with a higher median income has a greater impact on state income tax. Broader economic effects of the total state population decline include:
Business Exodus: As people and businesses leave the city, there's a domino effect causing companies to relocate, leading to job losses and reduced tax revenue for the state.
Consumer Spending Reduction
Decreased population and tourism have resulted in reduced consumer spending, affecting businesses reliant on the city's economic activity.
Employment Challenges
Shrinking labor pool could lead to shortages among skilled professionals.
Transportation and Infrastructure Impact
Reduced ridership and funding challenges for public transportation impact commuters and the state's transportation system.
Economic Confidence
The population decline influences investor confidence, potentially leading to reduced investments and slower economic growth.
Public Perception and Image
The decline affects the city's image, potentially impacting tourism and business partnerships, with ripple effects on the state's economy.
The top outbound destinations for people leaving New York include warm states like Florida, California, Texas, Georgia, and North Carolina. Reasons for choosing these destinations range from lower cost of living, retirement options, quality of life, business opportunities, tax benefits, and proximity to New York City.
Ultimately, the population decline in New York state has led to a complex web of economic and social impacts, affecting everything from revenue to real estate, business activity, and public perception. This analysis emphasizes that while the state must address these challenges, private capital and industry will play a crucial role in determining future opportunities.
