Chesterfield County Leaking Affluent Households

Which better represents the future of Chesterfield County? Rudd’s Trailer Park……. (Photo credit: Richmond Magazine

This column was published originally in the Chesterfield Observer. While the details of migration trends in and out of Chesterfield is unlikely to prove of great interest to anyone outside of Chesterfield, the analysis shows how citizens can use IRS migration data to gauge the health of their home locality. 

Hobbled by the sequestration-driven budget squeeze of defense spending, Virginia experienced its fourth consecutive year in 2016 of out-migration, the University of Virginia’s Demographic Research group reported late last year. While 301,000 income tax-filing households moved into the state, 315,800 moved out, for a net loss of 14,800 households. The last four years are quite a comedown for a state that previously had seen healthy population inflows every year since the Internal Revenue Service began compiling the statistics in 1978.

The picture looks somewhat better for Chesterfield County, which saw a net gain of 687 households from people moving in and out of the county in 2016. Some 10,300 households entered the county while 9,600 left and another 123,400 stayed put.

….or this McMansion?

People move from one locale to another for a multitude of reasons, but it’s normally a good sign when more people move in than out. Insofar as people follow jobs when they move, a net gain in migrants could mean that more jobs are being created. An inflow of residents also pumps up demand for housing, retail and services, thus stimulating local economic activity.

On the flip side, an influx of households places greater burden on the county to provide education, public safety, streets and roads, and other basic government services. In an ideal world, the newcomers bring in more taxable income and spending power to help pay for those services than those who leave. Unfortunately, that’s not what’s happened in Chesterfield. Households that moved here in 2016 reported an average income of $56,200; those that left reported $58,500 – for a total net loss of $17 million in countywide income. Admittedly, that’s a drop in the bucket compared to the $10.1 billion in total income reported by all non-migrants. But if this becomes a trend and persists for years and decades, it could fundamentally change the nature of the county.

A large percentage of the coming and going consists of people moving to and from neighboring jurisdictions in the Richmond metropolitan area. In 2016, Chesterfield experienced a net gain of 401 residents from Henrico County, 229 from the City of Richmond, and 56 from the city of Petersburg. However, the county lost a net of 126 households to Powhatan County.

The good news for Chesterfield is that it is importing more affluent households from Richmond, Henrico and Petersburg than it is exporting.

Newcomers from Richmond earned on average $46,100, while those moving from Chesterfield to the city reported only $39,500 in income.

Similarly, Henrico immigrants to Chesterfield earned $60,200 on average while households going the other way earned only $49,900.

The differential for Petersburg was $37,200 on average for households heading from the city to the county compared to a lowly $29,800 for households heading in the reverse direction.

However, Chesterfield lost significant income to Powhatan County in 2016. While the number of migrants is relatively small, the income differential is vast. Households moving from Powhatan to Chesterfield made $48,900 on average while those leaving Chesterfield earned $87,200, a differential of $37,300.

The largest sources of in-migrants from outside the region are Fairfax County, Virginia Beach, and Wake County, North Carolina (in the Raleigh metropolitan area).

The wrong conclusion to draw from this data is that Chesterfield taxpayers might benefit from crafting policies and ordinances that make the county less attractive to the poor, say, by blocking real estate projects developed for lower-income households. Aside from the ethical issues raised by discriminating against the poor, that’s not even good policy. Poor people will gravitate toward the cheapest, least desirable housing stock available in the metro area, whether it’s public housing projects in Richmond or aging cul-de-sac neighborhoods of small, rundown 1950s and ’60s era ranch houses in Chesterfield, regardless of any policies the county pursues.

A better strategy is to make carefully considered investments that help build a more prosperous, livable and sustainable community for all. Tracking the IRS migration data is a good way to tell how well county leaders are doing to create a desirable place for everyone to live, work and play.

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11 responses to “Chesterfield County Leaking Affluent Households

  1. The IRS migration data is great for understanding communities like Chesterfield, though I would not interpret the income flow difference mostly as Chesterfield becoming increasingly attractive to low income households and less attractive to high income households.

    That may be a factor in some older inner suburbs, but a lot of the income difference is likely due to the age groups moving to and from there. Chesterfield attracts young families from Richmond and Petersburg who are still growing their incomes and loses older adults at or near retirement who are often at the peak of their earnings. Powhatan, which has a much higher median age, is one of the places Chesterfield loses retirees to.

    • I think many localities in Virginia are underestimating the economic value of retirees. I hear economic development plans around tourism, data centers, Amazon headquarters, etc. I wonder if any locality has thought through how to attract financially secure retirees. It sounds to me that Chesterfield is losing these people to Powhatan. OK. Is Powhatan trying to attract financially secure retirees from Maryland, West Virginia, New York, etc?

  2. You want to put a REALLY serious hitch in the giddyup of Exurban Sprawl and white flight and the whole idea of being able to buy more house for the money by commuting?

    Kill the Mortgage interest and State and local tax deductions!

    wanna fix the subsidized flood insurance program? stop allowing deductions of any kind for second homes…at the beach..

    • I am not sure why the mortgage rate or state and local tax deduction would matter. The ex-urbanite buys a single family home on a 1/2 acre for $350,000 that is 40 miles from her job. Within 10 miles of the job that $350,000 buys a much smaller townhome. It’s still a mortgage on $350,000. Not being able to deduct state and local taxes might make people more sensitive to paying state and local taxes which, in turn, might make state and local government less likely to build and maintain the transportation infrastructure required for ex-urban commutes I guess.

  3. without the increased tax revenue on high dollar homes – the exurban counties could not provide the schools and other services at the level desired by their commuters.

    what exurban commuters can “afford” on the top end – is how much deduction they get for mortgage and local taxes… so they can afford less which means less tax revenues.

    combine that with the loss of business sales taxes from half empty shopping centers.. and you have serious fiscal issue .

    but .. the state has effectively “fixed” the infrastructure issue with tolls. Clearly they’re not going to be building more roads or lanes… remember that money comes from gas taxes – and sales taxes not income taxes.

    Our tax code currently subsidizes sprawl and building in storm/flood prone areas.. The mortgage and property tax deductions distort the housing market. Canada does not allow deductions for either… and their housing stock is much more modest… and commuting also is far less.

    • “what exurban commuters can “afford” on the top end – is how much deduction they get for mortgage and local taxes… so they can afford less which means less tax revenues.”

      Why is that any different for suburban or urban homeowners?

      It seems to me that the inability to deduct mortgage interest will make all relatively high end real estate less valuable since fewer people will be able to afford it. In fact, my first thought is that the ex-urbs will be more likely to weather the storm. Ex-urbs are homogeneous. There aren’t huge disparities in wealth (by and large). Everybody is paying taxes and contributing to the funding of government. In the cities there are huge wealth differentials. A relatively small percentage of the population, living in very expensive real estate, pay a disproportionate share of the taxes. If the yuppies in DC start losing their interest in moving into newly gentrified neighborhoods the whole house of cards might fall over. No?

    • I’m with you on this one, DJR, Evidently, the mortgage deduction has been promoting McMansions as just about the only readily available tax shelter available to high income execs and such with lots of disposable income (that is, NOT those of us sending kids to college). In the days before urban gentrification, the tax shelter effect unquestionably was a driver of suburban/exurban sprawl. Now, the tax shelter will be smaller; the incentive will be smaller. But it’s smaller wherever the home is, not just in the suburbs. Nowadays, older urban properties around DC are comparably priced to those McMansions, so as a consequence, the diminishing, or even loss, of the tax shelter probably isn’t going to change the rate of sprawl much at all.

      But it WILL make expensive homes even more expensive to own, and that may cause folks to live more modestly or to invest or spend their cash on other things than lavish first homes, or all those second homes that are occupied a small percentage of the year.

      From an urban planning point of view, I’d love to see sprawl diminished. I can see the tax bill maybe accelerating the gentrification of marginal areas in cities and towns where smaller, older homes are located, but that’s where my kids have gravitated for starter homes already. When it comes to urban versus suburban, I think those decisions reflect lifestyle choices more than ‘where’s my tax shelter.’ My main concern is that people now will “drive till they qualify” and carry on unchanged so long as they can stay under the deduction ceiling. We’d be better off with no mortgage deduction at all, except for the shock of getting there.

  4. Folks “drive to they qualify”.. and they’re looking at a monthly payment that they can afford. The deductible parts of it actually allow them to buy a more expensive house so they choose a house further out than a townhouse closer in.

    if you take away the mortgage interest and local tax deductions – what would high income urban dwellers do “instead”?

    just capping at 10,000 as now.. is going to cause some issues … because the deductions are essentially subsidies.. for higher dollar housing than one could normally afford.

    the reason it affect exurbs more is that that’s where the biggest “gain” is for people to afford a lot more house.. closer in, as you say, it’s townhouses.. and the difference is whether you get an upscale or a base level unit. Out in the exurbs.. you’re talking about 4000 square foot homes.. that are the ones that pay more in taxes than services consumed. The more modest homes barely break even on the services paid for by taxes.

  5. Here is something that the University of Virginia’s Demographic Research group can do with some measure of accuracy and usefulness, namely:

    1/ Tell us how many people, and how many households, moved into Chesterfield County last year, and

    2/ Tell us how many people, and how many households, moved out of Chesterfield County last year, and

    3/ Tell us the “average” incomes of those people and households who moved out of, and into, Chesterfield County last year, and

    4/ Tell us where those moving out of Chesterfield County moved to, and where those moving into Chesterfield County came from, last year.

    Beyond this information provided in Jim’s article, I know nothing.

    So here is my question. What else do demographers seek to know about those leaving, and those coming in, Chesterfield County so as to provide useful insight into how this past year’s change most likely impacts County in the near term. And how this year’s change in all its details interacts with past years, in all their detail, to show emergent trend(s), or fracturing thereof, discernible over the past 5 years, 10 years, 15 years, 20 years, 25 years.

    Another words, where does the demographer go, who does he talk to locally, and what other information does he consult, to draw a profile built upon the recent past, year by year up to and including the past year, so as to built a useful tool that helps others reach their own conclusions and opinions as to what that recent history, as so described, might portend as to near and mid term for the County?

    This article does not answer or even hint at the answer to that question beyond what is stated above. Yet, I know what I did, what I looked at and who I talked to, as a real estate developer trying to divine the future demands (met and unmet) likely to be play in a place of interest, and thus reach MY OWN opinion with the requisite assurance as to what I should build and how to lease it, all tailored to my personal vision of that future.

  6. re: ” What else do demographers seek to know about those leaving, and those coming in, Chesterfield County so as to provide useful insight into how this past year’s change most likely impacts County in the near term. And how this year’s change in all its details interacts with past years, in all their detail, to show emergent trend(s), or fracturing thereof, discernible over the past 5 years, 10 years, 15 years, 20 years, 25 years.”

    There are several govt agencies that actually collect data and make it available – not only for demographers.. but also marketers… and others.

    The IRS , the Census folks – and .. the Post office AND the election folks!

    Companies from WalMart to Subway use this data so they know right down to the street what the demographics are – for that street!

    When Jim, from time to time, waxes eloquent over the majesty of “Big DATA” – this is what he is actually talking about.. the govt collection of data than then is provided to any/all for research and marketing.

    Now with the age of the internet and smart phones – private companies like Inrix and others are also generating data and “mining” it. Inrix collects cell phone location data.. which every phone provides unless the owner disables that function and 99.99% of folks do not. Of course 99.98% don’t really realize that ..even as they use the GPS to get directions!

    All in all..data collection and “mining” and “fusion” (collecting data from different sources and aggregating it) are driving huge innovation and change that affects virtually everyone unless you live in a cave and eat lizards or rodents or some such!

    There are disagreements as to what the data means.. of course.. but when private companies use it in their business models..they pretty much got it correct; if they are wrong – they suffer financially.

  7. So I wonder why demographers so often get the future so totally wrong?

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