ATROPHYING OUR WAY TO CHEAPER HOUSING

While the Golden State has always had many problems — starting with racial inequities and entrenched poverty — it’s never stopped being a huge magnet for talented people from around the world. When this magnet helped Silicon Valley emerge in the 1990s as the world’s most powerful tech center, it felt like massive affirmation of the California dream.

But now, when Gov. Gavin Newsom endlessly talks up the state he leads, what jumps out to Californians is how much he leaves out. The most obvious is the most basic. While San Diego County’s population is expected to keep growing slowly until 2042, that’s not close to the norm. According to the most recent update from the Census Bureau, the state had a net population loss of about 750,000 in 2021 and 2022, with far more people leaving the state than moving. This has no precedent in modern California history. And as an analysis in the Los Angeles Times noted, those leaving aren’t just low-income individuals and families deeply motivated to find cheaper places to live. For two consecutive years, “more than 250,000 Californians with at least a bachelor’s degree moved out, while an average of 175,000 college graduates from other states settled in California.” A stunning June poll found 18 percent of residents were “seriously considering” moving elsewhere. Reflecting the economic insecurity caused by the extreme cost of living, 46 percent said they would struggle to pay for unexpected expenses.

This souring on California is also seen in the number of high-profile companies moving their U.S. headquarters to other states in recent years. It’s not just Tesla, which made a showy move from Palo Alto to Austin in 2021. Mckesson Corp., the pharmaceutical giant that’s a fixture in the top ranks of the Fortune 500, Hewlett Packard Enterprise, Oracle, Charles Schwab, CBRE and Toyota have also left.

This, of course, is just a small fraction of the world-leading companies that remain in the state, which is well-positioned to take advantage of the coming booms in biotechnology and nanotechnology. And the magnet offered by the state’s outstanding universities continues to exert its pull, with UCLA, UC San Diego, UC Irvine and UC Berkeley drawing the most applications in the nation in 2023. If enough of these talented students stayed in California, the brain drain would end.

But will that happen? It’s hard to look our elected leaders’ response to the state’s most fundamental problem — shelter costs so high they leave millions of middle-income and low-income residents alike living paycheck to paycheck — and have confidence. It’s now been nearly a decade since many state lawmakers began to appreciate that the only real longterm fix was sharply adding housing stock. Yet dozens of laws later, that hasn’t happened.

There is one very bittersweet prospect on the horizon, however. Here’s the key conclusion of a 2020 International Monetary Fund study of the effects of Japan’s population decline: “Due to the durability of housing structures, the decline in housing prices associated with population losses is estimated to be larger than the rise in prices associated with population increases.” This suggests perhaps California or parts of it can atrophy their way to affordable housing, and fairly quickly. As we enter 2024, that such a scenario seems to be the best one available is a grim comment on the Golden State.