Middle-Income Families Flee California

Some of the highest wages and fastest rates of job growth come from California, but high housing costs are leaving low and middle-income residents with limited options in many urban California areas. The latest reports from multiple sources indicate that the middle class will continue to struggle to buy a home in the sunshine state.

Figures from price tracker CoreLogic reveal that Los Angeles County’s median housing price in January was $490,000, a 6.5 percent increase from a year earlier. Median prices in many L.A. County communities were considerably higher. Arcadia’s median price, for example, was $880,000 in January, while Burbank’s was $650,000 and Torrance was $632,000.

Those high home prices have caused homeownership rates to trend much lower in California than in other states. And they’re still declining, according to one of the reports.

The housing problem in California is further compounded by the fact that housing is in short supply. From 2005 to 2015, permits were filed for only 21.5 housing units per every 100 new residents in the state. That put the Golden State second to last behind Alaska, where only 16.2 housing permits were filed for every 100 new residents.

On the flip side, Michigan saw 166 permits filed for every 100 new residents.

“This issue has been going on for the last 20 years,” Thornberg said. “We have been busily empowering NIMBYs (Not in My Back Yard) and disincentivizing cities from building enough housing to meet our needs.”

Prop. 13, an amendment to the California constitution that was enacted in 1978, greatly reduced the amount of taxes that can be assessed on residential properties, leaving local communities with far less tax revenue.

“If you have 20 acres of land and are trying to decide what to do with it, you’ll go with retail because that provides this wonderful tax revenue stream,” Thornberg said. “After that you’d want office buildings because that wouldn’t use as many commercial services and it’s cheap.”

The Beacon reports were commissioned by Next 10, a nonprofit think tank in San Francisco that was founded by venture capitalist and philanthropist F. Noel Perry.

“This research has shown that there is a lack of housing supply in California,” Perry said. “So it would seem reasonable that state and local leaders could work together to create more opportunities for the construction of homes and rental properties.”

If nothing changes, the outcome will be clear, he said.

Do you think housing costs could hinder the state’s ability to retain low and middle-income workers? We’d like to know your thoughts on California’s high housing market.

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  • Tom H

    I’m not surprised by this report.