The high cost of housing in California has been linked to a migration of low- and middle-income residents to other states in a series of new reports prepared by Beacon Economics for the nonprofit thinktank Next 10.
The reports, which analyzed trends in income, employment, migration and the housing market, found that while many economic indicators in the state are strong, the housing crisis is creating a dysfunctional economy in California.
From 2006 to 2016, 1,090,600 more people migrated out of the state than migrated to it, according to one report, “Growth and Dysfunction: An Analysis of Trends in Housing, Migration and Employment.” Large metropolitan regions such as the Greater Los Angeles Area and the Inland Empire have also experienced more people moving out of state than moving in. The Bay Area, on the other hand, has had positive net migration since 2014, according to Beacon’s analysis.
More than 20% of the out-migration (migration out of the state) that occurred in the past decade took place in 2006, when home prices were at an all-time high, according to Beacon’s report, “California Migration: A Comparative Analysis.” This trend slowed during the recession but increased in subsequent years as housing costs rose.
Californians over the age of 25 who did not possess a bachelor’s degree or higher accounted for more than 752,600 migrants who left the state in the past decade, according to the migration report. Most of those who left the state earned less than $30,000 per year. Analyzing migration of people with bachelor’s degrees or higher, California gained a net 43,200 people. Beacon’s assessment indicated that the state tends to attract migrants who have high-income occupations.
Out-migration was the highest among low-income earners over the last decade, according to the “Growth and Dysfunction” report. Low wage employment has increased from 25% of the state’s labor force in 2001 to 30% in 2016. At the same time, the median price of single-family homes in the state has grown to double that of the nation as a whole.
A longer report, “Current State of the California Housing Market: A Comparative Analysis,” revealed that California ranks second to last in homeownership of all the states, with about 53.6% of homes occupied by their owners in 2016 – a figure unchanged since 2014. California ranks 48th for rental housing affordability, with about a one-third of renters’ incomes going toward their rent payments.
Rental rates in California were about 40.2% higher than the national average in 2016, according to the housing report. Low-income households were found much more likely to be burdened by the cost of housing than other income-level earners.
The housing report indicated that the supply of residences in the state has remained relatively stagnant since 2008, “exacerbating affordability issues and driving increased out-migration and homelessness.” Although 2017 saw an increased number of construction permits issued for residential housing, it was roughly the same number of permits issued in 1997, the report noted. Beacon’s analysis attributed inadequate housing construction to regulatory burdens such as the California Environmental Quality Act, as well as local zoning restrictions and fees.
The group of reports concluded that the high cost of housing in California has made it an “increasingly difficult place for lower-income residents with less education to maintain their quality of life, while many middle-income residents are having trouble moving from renting to home ownership.” Higher earners, however, “continue to find the state an attractive place to live.”