California boasts some of the highest wages and fastest rates of job growth in the nation but high housing costs are pushing many people out of the state, according to a trio of reports released Wednesday.
The reports from Beacon Economics in Los Angeles address “Employment by Income,” the “Current State of the California Housing Market” and “California Migration.”
Beacon notes that 625,000 more U.S. residents left California between 2007 and 2014 than moved into the state. The vast majority ended up in Texas, Oregon, Nevada, Arizona and Washington.
LOW AND MIDDLE-INCOME WORKERS ARE LEAVING
The search for more affordable housing is sending low and middle-income workers out of the state, while higher-wage workers continue to move in, which argues against the theory that high taxes are driving people away.
“California has an employment boom with a housing problem,” said Christopher Thornberg, a founding partner with Beacon. “The state continues to offer great employment opportunities for all kinds of workers, but housing affordability and supply represent a significant problem.”
HOME PRICES ARE HIGH
Figures from price tracker CoreLogic reveal that Los Angeles County’s median 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.
San Bernardino County’s median home price in January was far lower — just $265,000. Still, prices were much higher in such cities as Chino Hills ($483,500) and Upland ($495,000).
HOMEOWNERSHIP RATES ARE LOW
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.
How low?
In 2014, California ranked 49th in homeownership, with only 53.8 percent of homes being owner-occupied. California’s average homeowners spent 25.4 percent of their household income on housing costs — more than homeowners in any other state.
Texas homeowners, by contrast, spent an average of 19.3 percent of their household income on housing.
NOT ENOUGH HOUSES ARE BEING BUILT
California’s problem 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.”
Beacon also notes that the proportion of renter-occupied housing units with more than one person per bedroom grew from 12.7 percent in 2007 to 13.2 percent in 2014.
PROP. 13 HAS REDUCED TAX REVENUES FOR RESIDENTIAL PROPERTIES
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.
“Left unchecked, housing costs could severely hamper the state’s ability to retain the low- and middle-income workers that help to power our economy,” Perry said.