Global investor Barry Sternlicht told CNBC on Tuesday he believes masses of people are moving away from major U.S. cities in favor of the suburbs.
“There’s hundreds of thousands of people looking for suburban homes, and I would say it’s not as driven by the Covid situation as it is safety and law and order, and that is now pervasive across the big cities of the United States, sadly,” Sternlicht said on “Squawk Box,” referring to recent protests that have sometimes turned violent.
Tax policy is another force that could be playing into the desire for affluent people to relocate from large cities such as New York, said Sternlicht, founder and CEO of investment firm Starwood Capital, which focuses on areas such as real estate and energy infrastructure.
Although cities may be facing declining revenues as a result of the coronavirus pandemic, Sternlicht said, “if you tax the wealthy even more in New York City … and they leave, then the social net has to be absorbed by the remaining residents and you can force them to leave.”
“The Biden tax plan, which I’m happy to pay more taxes, but I don’t think this increase in the capital gains rate is a good idea for investment in our country, which we need to do,” he said. And if that passes and the the limit on state and local tax deductions is not repealed, “you’re talking 60% plus taxes on the wealthy in New York City, and they will leave.”
“They’re leaving now. I’ve become a real estate broker for Miami,” added Sternlicht, who firm is headquartered in Miami Beach. “I keep sending friends down and showing them houses they can buy, and they’re buying.”
Despite concerns about higher taxes sending the rich south, Sternlicht said he would probably vote for Democrat Joe Biden for the White House instead of President Donald Trump. “The nation needs to heal, and I think we need to get back together, and I don’t think we’re going to do that with the rhetoric from the right,” said Sternlicht, who earlier this year agreed with Trump’s push to reopen the economy and supported Trump’s pre-coronavirus business-friendly agenda.
While the coronavirus also afflicts suburban areas, the future of U.S. cities has been a focus since the advent of the coronavirus pandemic, particularly since New York City had been an early epicenter of the health crisis.
“This is one of the greatest moves to the suburbs from urban areas since the 1950s or the ’60s,” “Shark Tank” investor Robert Herjavec said last month on CNBC. “I recently moved out of Los Angeles into a suburban area, and I can tell you on a very personal level, my area is on fire.”
Sternlicht’s comments on safety concerns and tax policy add to the conversation about geographic trends in the U.S. However, some people note that major metropolitan areas in the U.S. had already been seeing their growth slow prior to this year and, they say, trends that had already been underway before the outbreak may have only been accelerated.
“What the pandemic has done is taken family formulation moves that might have been made over the next one, two, three, four, five years and compressed them into one, two, three months,” Richard Florida, a University of Toronto professor who studies cities, said last month on CNBC.