Cleveland Fed Finds Demographic Differences in Downtown Areas

Research from the Federal Reserve Bank of Cleveland economist Daniel Hartley and Nathaniel Baum-Snow, a professor at Brown University found that for over four decades, the demographic compositions in and near the downtown areas in medium and large U.S. cities have shifted. The residents in these areas make more money, receive better educations, and are not likely to be minorities.

The researchers formulated a socioeconomic status (SES) index that reviews demographic information like income, education, and race. Using this, the Fed was able to find that cities such as New York City, Santa Barbara, Atlanta, Charleston, Charlotte, Chicago, Houston, Orlando, and Washington have the largest shares of central-area residents with high SES in 2010. All of these cities show a huge change from 1980, except for Santa Barbara.

“These changes in neighborhood choices may be driven by increases in the sizes of higher SES demographic groups, like the college educated, or by increases in demand for these neighborhoods by certain high-SES demographic groups,” the researchers said. “Though these changes began in the 1980s, these patterns of neighborhood change have become more widespread and dramatic since 2000.”

To study these downtown cities demographic changes, Hartley and Baum-Snow reviewed census data for a group of 118 medium to large U.S. cities that contained at minimum 250,000 people in 1970. They sorted data concerning income, education, and racial composition from lowest to highest and split each set of tracts into three equal parts, which allowed them to identify the top-tier tracts for each measure in every time period.

“The total population living within five kilometers of a CBD fell sharply in the 1970s and continued to decline to a lesser extent in the 1980s,” the researchers said. “But since 1990, it has been relatively stable at about 17 million people. On the other hand, because the population in metropolitan areas has continued to grow, the share of metropolitan area residents living near a CBD has fallen from 23.7 percent in 1970 to 13.6 percent in 2010.”

According to the research, the share of central-area residents that live in a neighborhood in the top-third of the census tracts ranked by average household income decreased from 13.3 percent in 1970 to 9.3 percent in 1980. It experienced growth of 11 percent in 1990 and 2000 and increased to 15.3 percent in 2010. Not only did high-income neighborhoods increase in the 2000s, but highly educated neighborhoods and more non-minority neighborhood also grew.

The average share of central-area residents living in a top-third-SES-index neighborhood decreased from 0.179 in 1970 to 0.154 in 1980, the report said. The greatest increase came 2000s when the index increased by four points from 0.168 to 0.208.

Click here to view the full research report.