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Mass Exodus of Workers Due to Lousy Housing Market

Why Stay in California When Good Jobs and Homes Are Elsewhere?

Credit: Pat Bagley, The Salt Lake Tribune, UT

California’s lousy housing market has gone from a trivial issue to a major crisis that may soon turn into a statewide economic downturn. From low-income laborers to high-income doctors, there are few industries that are safe from the state’s crumbling real estate market.

The housing market itself is troubled by two factors: a lack of supply and rising costs. The Legislative Analyst’s Office (LAO), the state’s agency responsible for fiscal and policy advice, has estimated the shortage is between 3.5 million to 4 million units. The lack of housing has not only driven up prices by 24.9 percent (for two-bedroom homes) since 2010, but it has also had a noticeable effect on migration. In another report, the LAO found that between 2007 and 2016, net migration in California was negative one-million individuals.

Interestingly, this mass exodus of people is siphoning off not just low-income earners but high-income earners as well. The tech firms and financial service giants of Silicon Valley and San Francisco will likely be the first to feel the effects of this squeeze on their workforce.

Though many of the techies and financial gurus employed by these firms can afford San Francisco’s median monthly rent of $3,700 (for a one-bedroom unit), a report from Urban Habitat showed that their tech industry counterparts in Seattle had an average of $5,500 more in disposable income at month’s end. For entry-level tech workers, this sum can add up quickly and makes the prospect of living elsewhere far more attractive.

For firms, the impact of expensive housing for their workers can be devastating. Without affordable housing that is proximal to their workplace, employees have good reason to pack up and leave for areas that strike a better balance between housing affordability and worksite proximity. Not only that, but expensive housing makes it more difficult for firms to attract new talent. Thus, if housing prices continues to rise in these areas, it would not be unexpected if firms began to move to more fiscally attractive areas, of which there are plenty.

Providing affordable housing for low-skilled workers is also important for California’s economy. A recent report from PolicyLink showed that in any given region, each new tech job creates between four to five new service industry jobs. Though we ought to praise the job creation effects of the tech industry, the National Low Income Housing Coalition still found that low- and moderate-income Californians are rent burdened at a rate of 65 percent and 35 percent, respectively. This creates an unfortunate dilemma. The economic growth that creates low-income and high-income jobs has a resultant effect of decreasing housing affordability due to the influx of workers into an area. This pushes out low- and middle-income families, making it difficult for companies to recruit and retain these workers.

This issue is particularly pronounced in the public sector, where middle-income workers constitute the majority of municipal workers. Moreover, for cities with high housing costs and substantial low-income populations, city government takes the brunt of the damage through unpaid utility bills, homeless services, and lower property tax revenue.

Treating the housing problem as just a housing problem is a step in the wrong direction. Instead, policymakers ought to consider the economic ramifications that a poor housing market will have on both individual regions and the state as a whole.

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