Heartland revival

The Heartland of America is booming

Jul 21, 2024

Key Takeaways

· Population Growth: The American Heartland experienced a 50% population increase from 1980 to 2023, significantly outpacing the Northeast's 16% growth

· Housing Development: Housing permitting in the Heartland, especially in the South, grew at a compound annual rate of 1.45% from 1988 to 2020, surpassing other regions, with a notable boom post-April 2020

· Entrepreneurial Surge: The Heartland, particularly the South and Mountain West, has seen the highest increase in new business formations amid a national startup boom driven by the COVID-19 pandemic

· Cultural Renaissance: The rise of craft breweries indicates a thriving cultural and economic revival, fostering community and entrepreneurial spirit

Migration of populations has been central to the American story since 1776. The nation was founded by settlers who came from Europe in search of economic opportunity and religious freedom. In the 19th century, pioneers pushed west in search of free land, granted by the federal government in the Homestead Acts signed by Abraham Lincoln in the midst of the Civil War. After the end of slavery, millions of African Americans migrated to northern cities from southern plantations. After World War II, veterans returned from overseas, started families, and built houses outside urban cores. America constructed a road network, notably the interstate highway system, that connected these suburbs to cities and allowed their inhabitants to commute to work.

In the early 2020s, another migration is happening in America, no less transformational. Since the 1980s, there has been a migration from the northern cities to the Sunbelt cities of the South. This migration has been accelerated by the retirement of the baby boomer generation. The COVID-19 pandemic supercharged this trend and broadened the migration from baby boomers to other demographics. The change was catalyzed by the rise of remote work and the associated separation of the office from the home. All of the sudden, people could live anywhere and work anywhere. This led many to leave the high-cost real estate of the coasts in search of more affordable lives in the Great American Heartland.

I call this migration the Heartland Revival and I will explore its nature using data from the US Census Bureau. Specifically, I will look at housing and population shifts, entrepreneurship, and culture. As the data will show, the US Heartland is booming.

Population shifts

Population data show the growth of the American Heartland when compared to all individual regions. In particular, the South is growing rapidly, led by Texas, along with the West, led by the “mountain lions”, cities like Boise, Idaho, Salt Lake City, Utah, and Spokane, Washington. In contrast, the Northeast is stagnant and even shrinking in some cases^[i].

If the growth in new home construction is less than growth in population, housing prices will increase. I have analyzed data for housing permitting and will show how growth in the American Heartland exceeds all other regions of the US.

First, the population of the American Heartland increased 50% from 1980 to 2023, from 144 million people to 216 million people. This compares to an increase of only 16% over the same time period in the Northeast.

Source: St. Louis Fed

Data for housing permits only goes back to 1988^[ii]. From 1988 to 2020, the compound annual growth rate in private single-family house permits for the American Heartland was 1.45%, exceeding the same figure for the Northeast by 15%. Within the American Heartland, housing construction was greatest in the South.

Source: St. Louis Fed

After a drop in April 2020, housing permitting boomed in the American Heartland through 2022. Conversely, the Northeast saw virtually no growth in housing supply as a result of the pandemic.

Source: St. Louis Fed

Entrepreneurship

Small businesses are the beating heart of the American economy. Looking at applications to form new businesses going back to 2004, the United States is currently in the midst of a startup boom spurred by the coronavirus pandemic. Although this entrepreneurship wave is broad-based, again the American Heartland has seen the greatest increase in new business formation^[iii].

Source: St. Louis Fed

Within the American Heartland, growth is greatest in the South, followed by the Mountain West.

Culture

Culture is difficult to quantify. In the book "Our Towns," James and Deborah Fallows highlight the significant role craft breweries play in the revival and growth of American towns. They argue that the presence of a craft brewery is a reliable indicator of a town's economic and social vitality. Craft breweries serve as communal spaces where people gather, fostering a sense of community and entrepreneurial spirit. According to the Fallows, a city that is on the rebound will likely have at least one craft brewery^[iv]. Furthermore, towns with craft breweries tend to have a certain kind of entrepreneur and a critical mass of mainly young people, which further contributes to the community's dynamism and innovation^[v].

In this category, the Mountain West dominates the ranking of breweries per 100,000 adults over the age of 21. Montana leads with 12.3 breweries per capita, followed by Colorado at 10.6 breweries per capita, followed by Wyoming at 10.5 breweries per capita^[vi].

The Heartland Revival represents a profound shift in America's demographic and economic landscape. This transformation, spurred by the rise of remote work and the pursuit of more affordable living, has rejuvenated the Great American Heartland. The data illustrates significant population growth, robust housing development, and a surge in entrepreneurial activity, particularly in the South and Mountain West regions.

The Heartland's revival is more than just numbers; it embodies a cultural renaissance as well. The proliferation of craft breweries, a symbol of local entrepreneurship and community vitality, highlights the region's burgeoning social and economic vibrancy. These trends signal a promising future for the Heartland, where a blend of affordability, innovation, and community spirit sets the stage for continued growth and prosperity. As America continues to evolve, the Heartland stands as a testament to the enduring appeal of new frontiers and the dynamic spirit that drives the nation's progress.