In 2021 Tesla moved their corporate headquarters to Texas, leaving their old location of California behind bringing 5,000 new jobs to the people in Austin and promising 15,000 more. They’re not alone, over 265 companies have left California since 2018. Once known as the home of both Hollywood and Silicon Valley and the center for many big companies, California, to the rest of the country, seemed like the industrial and technological hubbub of both American culture and innovation. Yet in the past year, the state has seen over 700,000 of its residents moving out.
Illustration by Angel Li
By Ananya Biswas, Kelly Liu, Sophie Ye, Emma Lin
Why?
To put it simply, California’s real estate is expensive, especially in relation to the rest of the country. When compared to the prices for a single-family home in California’s four biggest cities to Texas’ counterparts, a single-family home in San Francisco would be equivalent to three houses in Dallas, with money left over for a car. One home in Los Angeles is equivalent to four in Jacksonville. It’s no wonder that the March 2021 PPIC (Public Policy Institute of California) survey found that ninety percent of Californians found housing affordability a problem in their part of the state, and that some residents seriously considered leaving.
A collection of factors drives California’s real estate cost up. The primary reason is that there simply isn’t enough housing. Far less houses have been built in coastal areas than people demand. The low supply and high demand causes the cost to increase. Additionally, some of the unmet demands to live in coastal areas spill over to inland California, increasing the costs there too.
Land in California’s coastal areas is expensive as well. Homebuilders usually respond to this high price of land by building more housing units on each plot of available land so as to spread out the high cost among units, however, in California’s coastal metros, this type of response is limited. Due to this, higher land costs generally translate to higher housing costs. Secondly, the very act of building housing in California is more expensive.
Labor, materials, and government fees—three factors that determine a developers’ cost to build housing—are more expensive in California. Construction labor is about twenty percent more expensive in Californian metros than in any other part of the country and the state’s building codes and standards are considered more comprehensive and prescriptive and often require more expensive materials and labor.
Finally, communities in California have a resistance to new housing. Local communities make most decisions about new housing, even though residents may see new housing as a threat to their financial wellbeing by reducing the value of their own homes, or are apprehensive about the prospect of changing a familiar neighborhood. Over two-thirds of cities and counties in California’s coast also have policies that either directly limit (such as by capping the number of homes that can be built in a year) or indirectly limit (such as by requiring a supermajority of local boards to approve housing developments) housing growth.
And to build upon that, California also has the highest unemployment rate in all fifty-one states, at 6.5 percent. Even pre-pandemic, California’s unemployment rate was usually slightly above national average. However, many Californians work in the leisure and hospitality industries, industries that saw massive layoffs in light of the pandemic. In addition to this issue, people also are making less money. For example, a study by UC Santa Cruz found that nine in ten Silicon Valley jobs, after adjusting for inflation, make less today than they did twenty years ago. Even though per capita economic output in Silicon Valley increased seventy-four percent, inflation-adjusted wages fell for almost ninety percent of jobs.
California has been experiencing its slowest growth rates ever during the 2010s. The decline even caused a loss of a seat in the House of Representatives. This reduction in growth rates is a result of fewer births, more deaths, a slowing of international migration, and an increase in migration out of California. People who move out of California are also different compared to those that move in.
Those who move in are more likely to be of working age, employed, earn high wages, and are less likely to be in poverty than those moving out. Those who move in also tend to have higher educational levels than those moving out. People who move to California also generally have higher wages than those who move away.
So, the state has been losing lower and middle-income residents while gaining higher-income residents. However, most people who move across the state lines do so for family reasons; the vast majority of adults who left California in the 2010s cited jobs, housing, or family as the primary reason for doing so.
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