By David M. Greenwald
One of the big questions—is there a mass exodus out of California due to high costs of housing and other factors? While I have argued elsewhere that if housing—high costs or lack of affordable housing—is triggering the changes, it still reflects a housing crisis, the findings released last week by the nonpartisan California Policy Lab finds something else.
That report “finds that contrary to suggestions about a mass exodus from California, most moves in 2020 happened within the state.” Exits from California, on the other hand, in 2020 “largely mirrored historical patterns, while the biggest statewide change was a decrease in people moving into California.”
“While a mass exodus from California clearly didn’t happen in 2020, the pandemic did change some historical patterns, for example, fewer people moved into the state to replace those who left,” explains author Natalie Holmes, a Research Fellow at the California Policy Lab and a graduate student at the Goldman School of Public Policy at UC Berkeley. “At the county level, however, San Francisco is experiencing a unique and dramatic exodus, which is causing 50% or 100% increases in Bay Area in-migration for some counties in the Sierras.”
“Some folks seem to be worried about the tax implications of wealthy individuals leaving the state, but we don’t yet see any dramatic evidence that rich households are fleeing California en masse,” comments Evan White, Executive Director of the California Policy Lab at UC Berkeley. “Unfortunately, because the state relies heavily on income taxes on the uber-wealthy, the departure of even small numbers of wealthy people could negatively impact revenues if they aren’t replaced with new entrants.”
The overall finding is that people leaving the state have increased since 2015, but only very slightly, from 16 to 18 percent. The trend in 2020 continued “with no marked increase.”
A big change is that in the fourth quarter of 2020, 267,000 people left the state, but only 128,000 entered.
“There is no evidence that wealthy households are leaving the state en masse. Their rates of exit track trends in less wealthy areas,” the report found.
Where they did see a trend was people leaving San Francisco.
“Net exits from San Francisco from the end of March to the end of the year increased 649% as compared to the same period in 2019, from 5,200 net exits to 38,800,” the report found. But those people were not leaving California. “Approximately two-thirds of people who moved out of San Francisco remained within the 11-county Bay Area economic region, and 80% remained in California.”
Finally, “Counties in the Sierra Nevada mountains and other parts of northern California saw huge increases in entrances by former Bay Area residents, with 50% and in some cases 100%+ more in-migrants in 2020 as compared to 2019.”
These findings make a lot of sense. The cost of housing has skyrocketed in San Francisco and the Bay Area during the housing crisis. Meanwhile the pandemic means a lot of workers are no longer tied to the exact physical location of their jobs—instead they can telecommute.
Many experts expect that trend to continue post-COVID as many companies have learned they can maintain levels of productivity without requiring all workers to come to the site every day.
These findings reinforce our belief that we continue to need to find ways to solve the housing crisis in California—to make housing more affordable for all. But it can change the ways in which we look at things like jobs-housing balance.
As we reported back in January, Matt Levin, writing for CalMatters, posits three lessons he has learned covering California’s housing crisis.
First, Levin argues “there is not one housing crisis,” but rather, “three housing crises.
“There are really three distinct housing crises roiling California. While often stemming from the same underlying problems, they impact different segments of the population and warrant different solutions,” he writes.
First is the homeless crisis, with 150,000 homeless people in shelters or living on the street.
Second is there are another 7.1 million Californians living in poverty “when housing costs are taken into account.” He writes, “While not homeless, 56% of these low-income Californians see more than half of their paychecks devoured by rising rents. Skewing Black and brown, these are the renters who face intense displacement and gentrification pressures, live in overcrowded and unsafe housing conditions, and have fled urban cores for cheaper exurbs over the past two decades.”
Third, it affects the younger generation of middle-class and higher-income California, as “the average California home [has been costing] about three times the average household’s income. Now it costs more than seven times what the average household makes. High rents make saving for a down payment that much more difficult. While lower-income Californians have struggled to afford the state for decades, the term ‘housing crisis’ and its attendant publicity really only came into vogue once richer Californians started seriously considering moving to Austin or Portland or Las Vegas.”
If this analysis is correct—and it seems reasonable—we can’t simply sit back and let the market adjust the problem, because this is likely to impact the future sustainability of the state.
Second, he believes that the rise of telework will “dilute demand to live in dense, urban environments.”
He believes, though, that this will cause enough to move, cooling the rents in places like San Francisco, Los Angeles and San Diego, but that “the price of single-family homes and larger rentals in mid-size cities, suburbs and exurbs will rise. “
Indeed, the report from the Cal Policy Lab bears this out: “This net loss of San Franciscans helps explain the dramatic decline in the city’s rents in 2020: with fewer people competing for housing, landlords slashed rents to keep units occupied.”
Finally, Levin argues, “The big dividing line in housing politics is whether you think one more unit of market-rate housing is a good thing or a bad thing. It is mostly a good thing, but it depends.”
Unfortunately none of this really changes the fact that California needs to build more housing. But it should calm fears that the state will start losing its population.
—David M. Greenwald reporting
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The bottom line is that the state is essentially no longer growing, as more folks are leaving than are arriving – as noted in the article itself.
The “problem” has not actually been defined, in any coherent fashion.
That is an example of how the market “resolves” itself, as is the drastic reduction in folks moving to California.
The bottom line is why the state is essentially not growing and whether that is an artifact of the pandemic or a new trend.
I would think many feel the state not growing is a good thing.
As I recall, the relative lack of population growth started before the pandemic. Pretty sure that I posted an article, regarding that.
Regardless, increased telecommuting appears to be a permanent trend.
There are counties within California that essentially don’t grow at all – pandemic or not. Jobs are what have historically caused people to migrate to certain areas.
Taxes and high labor costs are what is causing some companies to relocate to places like Texas. Perhaps also leading to fewer migrants into California, from other states. Also appealing to workers, as a result of lower personal taxes and housing costs.
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Some companies relocate due to fewer regulations in places like Texas, as well. Ask Elon Musk if that’s a factor. (No – it’s not something that I advocate.)
Ultimately, places like China and India will increasingly beat all, due to lower costs.
Right but it looks like changes are the inflow not the outflow.
Judging from the current border ‘crisis’ that’s soon about to change.
As noted in the comments below, and in the article cited, the Sacramento region is expected to grow from those leaving the Bay Area. So Davis is slated for more growth as distinct from the overall state growth. We look cheap in comparison to land prices in the Bay Area so, as Alan notes, rental rates will increase the price pressures.
The problem quite clearly is that a shortage of housing supply in Davis is causing housing prices to rise disproportionately to median household income growth. That means that we are (1) pricing out families in the “missing middle” and (2) establishing racial segregation barriers to entering Davis on a permanent basis. This situation makes our community less vibrant, resilient and productive. We also put the squeeze on low income students trying to rent here while going to UCD (and the UC provides relatively costly housing, and the student who live on campus can’t participate in City elections.) In the end we have a segregated community that protects those privileged enough to either have moved here much earlier when UCD was dominated by white students or have a much higher than average income, again dominated by privileged racial groups.
“Some companies relocate due to fewer regulations in places like Texas, as well. Ask Elon Musk if that’s a factor. (No – it’s not something that I advocate.)”
I’ve posted data earlier that shows that the number of companies leaving California is trivial and the anecdotes are driven by a misplaced media focus. California’s economy continues to boom and has been among the top 10 states for decades.
As noted in the comments below, and in the article cited, the Sacramento region is expected to grow from those leaving the Bay Area. So Davis is slated for more growth as distinct from the overall state growth. We look cheap in comparison to land prices in the Bay Area so, as Alan notes, rental rates will increase the price pressures.
I agree with Richard’s assessment, and would add further that employees who can now work from home rather than going into work at SF and/or Bay Area offices who come to Davis will be adding more weight to Davis’ current status as a “bedroom community” where the vast majority of the working population of Davis “goes” to jobs that are beyond the City Limits of Davis adding item (4) work-from-home electronic destinations to the following list (1) Government offices in Sacramento, (2) medical center jobs (Mercy, Sutter, UCD and Kaiser) in Sacramento and environs, as well as Vacaville, and (3) the UCD campus.
LA Times reports that California expected to recover faster than the country as a whole – https://www-latimes-com.cdn.ampproject.org/c/s/www.latimes.com/business/story/2021-03-10/2021-california-covid-economic-recovery-outpaces-us?_amp=true
As I’ve posted earlier, the rumors of California’s demise are greatly exaggerated. The number of business exits is relatively small compared to the growth in businesses over the last 40 years that the “prophets” have been claiming the end is near. The same goes for population movement. Yes, the number of residents is now static, but national growth rate also has declined markedly.
What’s more interesting about this article is that Davis would appear to be the archetypal community for the Bay Area exodus. That argues that we should get ready for more growth pressures here, distinct from any statewide trends.
And that is in fact what is happening in the Sacramento region
That ‘pressure’ is seen in market forces, i.e. residential rental rates. From a few Davis renters I’ve talked to who have received their renewal rates for next school year (Sept 1), any relief given from some residential rental property owners from Covid-19 effects this year are being negated and then some in the form of another sharp rise in rental rates for Fall ’21. This is no doubt due to: 1) UC Davis announcing the expectation of full regular classes in the fall; 2) UC Davis announcing record applications; 3) Expectation of a largely vaccinated population by Fall; 4) Techies exiting the Bay Area for cheaper quality communities with good schools, of which Davis fits the bill. This puts tremendous pressure on Davis with its JeRkeD-limited footprint, and the result will be the continuation of staggering rent increases, tempered slightly by Sterling and Lincoln-40 etc. going on-line. All the federal and State subsidies on one could muster won’t change this, except to benefit a lucky/chosen few who win the A-ffordable lottery of subsidy. We created this – and now we must live in it – but hey, rental property and home owners in Davis – you won!!!
Telecommuting was an emerging trend well before the Pandemic. Now that we’ve learned that commerce can not only continue but prosper with off-site workers, the work-at-home notion has spiked. This leads us to a companion problem and a potential solution.
The market for office space is in decline since we have many workers staying at home. Remember those “see-through” commercial office buildings in 2008? They’re back, and Davis is no exception. Toss in empty shopping malls and empty movie theaters, and department stores that are no more. Empty parking lots.
Lots of existing functional building space and lots of homeless people needing basic human needs for a place to sleep and have bathing facilities. Could a problem and a solution find each other?
Bath in the shell of former department store?
The state’s water operations center, federal weather forecasting, flood operations center and water supply forecast operations happen in a converted former department store. After working there for 20 years, I can tell you that any building can be converted to any purpose. So why not in the shell of a former department store?
My comment was meant to illicit the fact that you don’t just unlock the door and let people move in with no facilities. Can on imagine what would happen if you did. So the point is, this takes time, capital money, and permanent operational money. “Could a problem and a solution find each other?” sounds like no money is required. So OK, it’ll take money – so where does that come from – is the conversion a sound use of funds for converting a facility? This isn’t simple. Or you could buy the building open the door, invite the so-called homeless, and watch what happens, sans a program or operating funds.
The article references California’s lack of population growth. It also has nothing to do with Davis in particular.
The region is absorbing some of the migration out of the Bay Area. Woodland is approving massive amounts of new housing, within 7-8 miles of Davis. Bottom line is that there’s plenty of (new) housing available, despite the fact that the state is no longer growing.
Ultimately, cities that welcome growth and development are the ones that will absorb it. They also tend to be the cities that suck, and have very little concern for conversion of farmland to urban uses. They also end up choked with traffic/gridlock, and (ironically) often have high housing prices (e.g., San Jose, Los Angeles).
It’s truly unfortunate that some are still pushing for continued sprawl – despite lack of population growth.
There is no evidence (as in “NONE”) that building another peripheral subdivision outside of Davis’ city limits would lower housing prices, nor is there any evidence (as in “NONE”) that doing so would result in further desegregation of the population of Davis.
But if you (or David) were actually concerned about desegregation, where were you when the “Davis buyer’s” program was announced, for WDAAC?
What?
Both the city and UCD have approved massive amounts of new student housing. I’m *sure* that it will be a god-damn “bargain” for them, resulting in extremely low housing costs for those students. (Sarcasm intended.)
How do you define “trivial”? Are you referring to Oracle, Hewlett Packard, and Tesla (to name 3) which have expanded operations in Texas?
” It also has nothing to do with Davis in particular.”
I think you would say more accurately, it doesn’t directly deal with Davis, but to say that it has nothing to do with Davis, is inaccurate.
“But if you (or David) were actually concerned about desegregation, where were you when the “Davis buyer’s” program was announced, for WDAAC?”
I would say that horse has been beaten to death.
None of the three that you listed are “growing” all that much, regarding job creation.
But again, this is a regional thing, and Woodland (locally) is accommodating a great deal of growth from in-state migration.
Beyond that, so are places like Folsom, Roseville, Elk Grove, Natomas, Rancho Cordova, etc. As well as Tahoe and Truckee, for that matter.
Regardless, I’m not sure why it’s any particular city’s responsibility to accommodate those who are no longer interested in living in the Bay Area – where it’s not creating sprawl, traffic, greenhouse gasses, etc.
Then perhaps you, Richard, and other growth advocates should probably stop bringing up the fake “desegregation” argument, regarding another peripheral development. Really, it’s outright embarrassing for someone like you to make that argument.
One only has to look at The Cannery, to see the outcome of another peripheral development. How much did that lower housing prices, or lead to increased enrollment (for the crowd who thinks that the city should accommodate the school district’s unwillingness to adjust)?
Hey – do you think you’ll ever interview someone like Whitcombe, to see how much “lower” he’d price new housing? Or, maybe any of those other local developers (e.g., the people who developed “North, North Davis”)? What was that guy’s name, again?
As a side note, some seemingly-knowledgeable people are predicting another housing crash, as the eviction moratoriums and mortgage forbearance programs end in a few months. And you can be sure that the folks who are complaining about high housing prices now will somehow complain again, when they crash. They are development lackeys, plain and simple.
Just a reminder:
Effective Feb 15 2021 there is a limitation on comments per article—five comments per article per commenter.
As Shakespeare once said, “To willful men, the injuries that they themselves procure must be their school masters.”
Its all about the weather and California has the best weather. People may leave the places that are too expensive because they can telecommute but that doesn’t mean they are leaving the state. I imagine that young families that no longer need to be in San Jose but want good schools will find Davis attractive with its suburban single family homes and mild winters. After all, the Donners wanted to be here for winter.