Industry Round-Up: Managed Retreat Programs, Migration Patterns, and Household Savings

Welcome to our industry news round-up, where we cover the latest real estate trends and location insights.

This week, Jason Stanley, Head of Research at Local Logic, discusses:

  • The effectiveness of ‘managed retreat’ programs
  • The narrative of migration to the Sunbelt and suburbs
  • The pandemic-fuelled build-up in household savings

The effectiveness of ‘managed retreat’ programs in reducing flood risk raises concerns about persistent indirect risks and regional vulnerabilities.

‘Managed retreat’ programs incentivizing households to move away from flood risk are meaningfully reducing flood risk.

However, households are overwhelmingly moving within the same local region, which raises concerns about whether they continue to be exposed to heavy indirect risks, as the infrastructure, employment, and services they depend on could remain in flood (and other) risk zones.


Local moves of HMGP participants from a census tract in middlesex, NJ via IOPscience

Source: IOPscience


Figure 1 is from recent research on address-to-address moves by households leveraging FEMA’s Hazard Mitigation Grant Program (HMGP) between 1990 and 2017. It illustrates an example of moves made by households that are taking advantage of the HMGP program in New Jersey.

Two things are notable here:

1) Yes — such moves do tend to reduce flood risks for households. Research via IOPscience sheds new light on the effectiveness of HMGP in reducing direct flood risks.

2) However, the extent to which these measures reduce exposure to indirect flood risk remains unclear. This is a risk that we all face because we rely on infrastructure, assets, and activities that are susceptible to disruption from floods (and other risks).


Map of NYC New Hurricane Evacuation Zones via Gothamist

Source: Gothamist


Figure 2  shows a recent NYC flood risk map. Large parts of the city — including dense, economically vibrant parts — are exposed to serious risk. Not all households living in the New Jersey region depicted in Figure 1 work in or rely directly on NYC’s economy, but some do. In addition, the NJ area has its own regional risk distribution that tells us where infrastructure, employment hubs, and services are risk-exposed.

Local moves out of floodplains might not be enough to reduce indirect risks faced by all households, employers, and tax authorities in a region given the risks faced by key nodes in the economic and social graph of that region.

The narrative of migration to the Sunbelt and suburbs is contradicted by data as lack of housing availability drives mobility rates down.

Migration to the Sunbelt and out to the suburbs has dominated headlines in recent years — but mobility rates haven’t budged and are in line with their long-term decline.


Declining mobility rates graph via Financial Times

Source: Financial Times


Households have always moved locally in much greater numbers than they have across counties, states, or countries. But, over the years, that ratio has changed considerably, with local moves becoming less and less important, as shown in Graph 1.

The shortage of available housing is a key factor explaining this lack of mobility. It affects housing prices, making them unaffordable as the limited supply is in high demand. It also takes more time for people to find suitable locations and properties that meet their needs.


Declining house vacancy graph via Financial Times

Source: Financial Times


Graph 2 shows how the vacancy rate of housing has changed in key metro areas since 2010. Cities at the top of the list have shifted from being attractive destinations to facing housing crises, with affordability concerns surging.

Overall, the data and visuals challenge the narrative that suggests a large-scale migration of households to the South. The reality seems to be different, and the scarcity of housing plays a significant role in shaping people’s mobility patterns.

Resilient household savings drive strong consumption, but increasing delinquencies signal challenges for younger cohorts.

Build-up in household savings via Apollo

Source: Apollo


The above visual shows how the pandemic-fuelled build-up in household savings has yet to be drained and is an important motor of strong consumption despite recession risks.

However, there is certainly an age cohort story here, since credit card and auto loan delinquencies are rising, especially among younger cohorts — the same cohorts that will soon be hit by pandemic-stalled student loan payments later in the summer.

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Thao Tram Ngo

July 25, 2023 | 4 minutes read