It should come as no surprise that California is an expensive state. Cities like San Diego, Los Angeles, Orange County, and San Francisco all make the Golden State one of the most expensive states to live in.
And when Californians move, they drastically inflate housing costs in neighboring states.
In recent years, Californians have been moving to other states, particularly those in the West and Southwest. A study by the National Association of Realtors found that people from California were among the top buyers of homes in Idaho, Arizona, and Utah in 2021. Additionally, a study by Zillow found that home prices in certain areas of Idaho and Utah increased by more than 50% in 2021, which was significantly higher than the national average.
Here’s how it works.
Someone in California sells their home. Homes in CA are valued at outrageous prices. Therefore, the sale of a California home creates an influx of cash to be used for another house in a lower-cost-of-living area, such as Idaho, Nevada, or Arizona. Flush with extra cash, ex-Californians are prepared to pay more for housing in a neighboring state because they have more to spend.
That creates higher “comparables” in the area, whereby other homes’ values increase by virtue of another home selling for more than it’s probably worth. As this cycle continues, home values continue to increase, making it substantially more difficult for residents of those states to buy homes because they don’t earn the same salary as California residents.
It’s tough for many people to afford homes in the neighborhoods where they grew up.
There are a number of things that can be done to help local residents afford housing.
Here are a few ideas:
- Increase the supply of affordable housing. This could be done by building more affordable housing units or by providing subsidies to help people afford to buy or rent homes.
- Provide tax breaks for low- and middle-income families. This could help them afford to buy or rent homes.
- Invest in education and job training. This could help people earn more money and afford to live in the communities where they grew up.
- Implement rent control measures. This could help to stabilize rent prices and make it more affordable for people to rent homes.
- Provide assistance to renters and homeowners who are struggling to afford housing. This could include financial assistance, counseling, and legal aid.