News and Commentary

High Housing Costs Are Driving Californians Out Of State
Gavin Newsom, governor of California, speaks during a news conference in Sacramento, California, U.S., on Tuesday, April 14, 2020.
Rich Pedroncelli/AP/Bloomberg via Getty Images

The California state government found that skyrocketing home prices are driving much of the state’s net outmigration.

A recent report from California State Controller Betty Yee — who analyzed the impact of net migration on tax revenues — indicated that residents’ moves out of the state have tracked closely with ballooning home values.

Yee writes:

For California, the evidence presented below suggests that the single biggest factor driving migration decisions is the cost of real estate. The average home price in California is more than double the U.S. average. The high cost of housing in California makes it more difficult for current California renters to strengthen their ties to California by purchasing homes, makes it harder for potential in-migrants to move here, and encourages current homeowners to extract value from their homes by moving to less expensive states. Businesses are adversely affected by both the direct costs of real estate for their operations and by the need to increase wages and salaries to recruit workers willing and able to afford to live in California.

Between May 2012 and May 2021, the average price of a Californian residence rose from $305,000 to $668,000 — a 119% increase. Meanwhile, the average home price in the United States rose from $163,000 to $287,000 — a 76% increase. 

Polling data support Yee’s assertion:

In a March 2021 poll from the Public Policy Institute of California, 33 percent of adults polled said they have seriously considered moving out of CA because of the price of housing. In a 2019 Edelman survey, the cost of housing was named the most important problem by four times as many Californians as the second most popular choice (health care).

Between March and December of last year, 267,000 people moved out of California while 128,000 moved in — meaning that nearly double the number of Californians are leaving the state than entering. The problem is particularly bad in San Francisco, where residential prices and crime rates are especially high. Between 2019 and 2020, six-and-a-half times as many people left the city than entered.

As Daily Wire editor emeritus Ben Shapiro analyzed in a recent episode of Debunked, excessive policy intervention from bureaucrats tends to worsen housing shortages:

So here’s the thing: government will subsidize affordable housing. Okay, so you subsidize the affordable housing. What do you think happens next? Well, nobody wants to live next to the affordable housing, so they leave. But then the tax base decreases. So then you have to raise the taxes on everybody who’s left. But then more people leave, and then the tax base decreases again. This is how you drive people out of California.

You want to know why San Francisco is now all high-tech entrepreneurs and homeless people? Rent control is a big part of that story. Yet in California, Democrats are actually trying to unleash rent control across major cities. Last year, they put it on the ballot. Even Californians weren’t dumb enough to vote for it.

The cities that have some of the worst rent issues are the most heavily-regulated cities. Places like Seattle make it incredibly difficult to build new housing. San Francisco has been rated the most over-regulated city in terms of real estate in America. L.A. is in the top ten. Riverside is in the top ten. Is it any wonder that you see 150,000 homeless people in California these days?

Though Yee does not currently observe a threat to California’s tax revenue, a continued outmigration would inhibit the state’s ability to pay its $152 billion in public debt.

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