Angelenos and San Franciscans know their housing is insanely expensive, but California on the whole has some of the most expensive housing in the US, and that’s driving many poor and middle-class Californians out, says a new report from Beacon Economics and released by Next 10, a nonprofit group founded by Bay Area venture capitalist F. Noel Perry (via the San Gabriel Valley Tribune). In the years between 2007 and 2014, “625,000 more people moved out of California to other states than moved into California from other states.”
Beacon says that a closer look at who is leaving California—their income, education, jobs—suggests that expensive housing costs are a far more likely explanation for out-migration than, say, the commonly complained-about taxes, which would be more likely to drive out the rich. Housing costs have been blamed for pushing lower-income people out of the state before, and a companion report from Beaconshows how unrealistically expensive the market has come in California; it now has a severe housing shortage and the second lowest homeownership rates in the country.
Who are these migrants? “[T]he majority of out migration can be attributed to residents who earn less than $30,000,” Beacon says, and a huge chunk of those people leaving—192,700 over the seven-year period—are in “lower-skilled, lower-paying” fields, meaning something like food preparation, transportation, or office administration—jobs that are pretty essential to any state.
California’s out-migrants also tend to have a lower level of education; 469,800 people who left the state had less than a bachelor’s degree. Most residents who left California left for one of five states: Texas, Oregon, Nevada, Arizona, Washington.
For a Californian with a lower-paying job in a lower-paying field who doesn’t have a bachelor’s degree, locking down housing is painful. The average apartment in the US costs $1,227 to rent, while an apartment in a California metro (where there’s a concentration of jobs) might cost $1,602 (LA) or $2,109 (San Jose) or even $2,557 (San Francisco), Beacon says. Moving to a place where rents are closer to the national average could save someone over $10,000 annually.
And buying a house is equally tough. Homeownership costs in California are prohibitively high. Beacon makes the comparison to Austin, Texas’s most expensive metro, where a median-priced house will run about $261,000, while California’s median priced house is $395,000. And that’s the whole state—buying in or near a city like LA will push that median significantly higher. (Definitely a huge part of the reason why the greater LA area specifically has the lowest homeownership rate in the country.)
Texas is an interesting example to cite here: Toyota recently left their Torrance location for the Lone Star State, and it was reported around the time that housing costs played a big role in the car company’s departure. Workers supposedly told Toyota officials “We’re willing to move. We just want to live the American Dream.”
And that’s the kind of problem that this housing-migration relationship can cause. “California has an employment boom with a housing problem,” a founding partner with Beacon Economics tells the SGVT. “The state continues to offer great employment opportunities for all kinds of workers, but housing affordability and supply represent a significant problem.” And that’s obviously become unsustainable.
The report “has shown that there is a lack of housing supply in California. So it would seem reasonable that state and local leaders could work together to create more opportunities for the construction of homes and rental properties,” the founder of Next 10 says. He warns that, if not addressed, the housing supply shortage could “severely hamper” California’s ability to hold on to these workers “that help to power our economy.”