California’s Frightening Rankings
To be sure, the state has enjoyed faster income and job growth than the rest of the country over the past decade. But over the past few years, even before Covid-19, it has fallen behind other states, such as Texas, Utah, Washington, Nevada, and Arizona.
The state is often praised for its elaborate environmental and labor protections, but its record on economic mobility, middle-class disposable income, and even on greenhouse gas reductions, is not encouraging. The gap between middle-class Californians and the more affluent is becoming greater.
Ironically, California’s elected officials claim that they support low earners and historically disadvantaged groups, including African Americans and Latinos. But nothing could be further from the truth. The California of today reflects a very specific failure of governance and policy choices that are enormously biased towards very wealthy political elites who strongly support incumbent politicians and who can easily afford the rising cost of living that comes with their political preferences.
Almost everywhere you look, you will see somebody talking, writing, or complaining about California’s housing crisis. Choosing to live in San Francisco, Los Angeles, San Diego, or Silicon Valley will cost you about $1,000,000 if you buy, and about $3,000–$5,000 or more a month if you rent. And that is if you are willing to live in something you would not want to post on Instagram.
California’s housing situation has become sufficiently absurd that tech engineers earning six figures are choosing to live in vans.
By now, nearly everyone agrees that the crisis reflects a long-standing supply shortage that is due to extremely high building costs, which in turn are related to poorly designed policies. As 2022 elections approach, there is virtually no hope that California policymakers will do what it takes to substantially expand supply, as the rate of new home construction here ranks 49th in the country.
Many families are paying in excess of 50 percent of their household income for rent, which is dangerously high, compared to the industry standard of 30 percent of household income. In Los Angeles, almost 60 percent of renters pay more than the standard 30 percent, and about half of those are paying over 50 percent. These families are a lost paycheck or a car repair payment away from losing their home.
Just How Bad Are Things in California? Here is a Partial Breakdown:
• Poverty rate: 50th • Housing affordability: 49th • Cost of living: 49th • Inflation-adjusted household income: 27th • Tax rate for top earners: 50th • Sales tax rate: 50th • Business taxes: 49th • Overall tax burden: 40th • Business climate: 47th, 48th, 50th • Infrastructure quality: average grade of D+ • Traffic congestion: 47th • K–12 learning outcomes: 42nd • Homelessness rate: 50th
For the first time since 2010, when the state’s unemployment rate was over 12 percent and exceeded the national average, California is losing population. Over the last year, nearly 200,000 people have left California, primarily for states with much lower housing costs and with better growth opportunities for middle-income earners. Under the current conditions, it's easy to understand why.
Article content is from the January 2020 report “A Perverse Way To ‘Solve’ California’s Housing Crisis: People Are Leaving The Golden State” by the Hoover Institution’s Lee Ohanian.