Housing is the main reason people are leaving California, according to a Los Angeles research firm.
“Lower income Californians are the ones who are leaving, not higher income,” based on the U.S. Census Bureau’s American Community Survey data, said Christopher Thornberg, founding partner of the Los Angeles research and consulting firm Beacon Economics.
But it’s the middle-class and middle-age residents who are departing the state in droves, the Internal Revenue Service data appear to show, according to Joel Kotkin, a presidential fellow in Urban Futures at Chapman University in Orange.
Furthermore, Kotkin believes the outmigration from California may start to rise among higher-income people, given that the GOP’s federal tax overhaul will result in certain California taxpayers losing from the state and local tax deduction cap.
“They are the ones who will tend to have the high property taxes and rely on writing it off,” he said.
California is often criticized as one of the highest-taxed states in the nation. Last year, Gov. Jerry Brown signed the 12-cent-per-gallon increase in the state’s excise tax on gasoline, bringing the tax to 41.7 cents per gallon. Drivers here already pay the highest average for gasoline after Hawaii.
A USC Dornsife/Los Angeles Times Poll of Californians last fall found that the high cost of living, including housing, was the most important issue facing the state. It also found more than half of Californians wanted to repeal the state’s new gas tax, which raised fees by 40%.
“The rate at which California has been losing people to other states has accelerated in the past couple of years, in part because of rising housing costs,” said Jed Kolko, chief economist with employment website Indeed.com.
The latest Census Bureau data from July 2016 to July 2017, show that California saw a net loss of just over 138,000 people, while Texas had a net increase of more than 79,000 people. Arizona gained more than 63,000 residents, and Nevada gained more than 38,000.
In Nevada, there’s “a lot of buying power for the dollar … versus Southern California,” said Christopher Bishop, president of the Greater Las Vegas Association of REALTORS®. “So it has been a major trend over the year, year and a half, and we’re seeing it increase.”
Bishop said some Silicon Valley companies employees are working remotely from home in Las Vegas to avoid the higher housing costs in California. But he added, “Most of the people are here because of our growing job market and industries in Las Vegas—and it’s not all about casinos anymore.”
People still want to move to California, but some find it tough to do because of the high cost of housing.
Top 10 Expensive Rents
California has five of the top 10 most expensive rental markets nationwide, according to industry tracker Zumper.
San Francisco ranks as the nation’s most expensive, San Jose is third, and Los Angeles is sixth. Oakland and San Diego also made the top 10.
“For a lot of people, renting is the only option they have because it’s tough to afford a house here,” said Steve Feldman, a Keller Williams real estate agent in the L.A./San Fernando Valley region.
The median monthly rent for a one-bedroom apartment in the Los Angeles area is $2,249, and $3,200 for a two-bedroom. In San Francisco it’s almost $3,400 for one, $4,500 for two bedrooms, according to Zumper.
By comparison, the median rent for a one-bedroom in Las Vegas is $925, and $1,122 for two bedrooms. Phoenix is $945 and $1,137.
“High housing costs are a challenge for employers, who need to offer workers enough so they can afford to live here,” said Kolko. “Despite this, California is still hiring, and job growth was strong over the past year.”
California’s $550,990 median price statewide for an existing single-family home compares with the national median price of $247,800, according to the National and California associations of REALTORS®.
“People who have owned their house for quite a while can cash out with quite a nice bit of money in their hands,’ said Feldman. “They can go to another state and buy a house for a fraction of what they have here and tuck away a lot of money and retire, work or bring their cost of living and overhead down.”
Not the Highest Tax
H.D. Palmer, a finance spokesman for Gov. Brown, said “it’s correct that our top marginal personal income tax rate is highest—12.3%, not including the 1% surcharge for millionaires under Prop 63 (to fund mental health services).”
However, Palmer said, when including tax collections per $100 of personal income, California ranks No. 10 nationwide, based on 2015 state and local revenue data tracked by the Federation of Tax Administrators. Minnesota, New York, New Jersey and North Dakota all come in higher in terms of tax burdens.