Broker Check
Are People Leaving California?

Are People Leaving California?

October 15, 2020
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We have made observations of late that made us wonder if more people are deciding to leave California. First, a handful of friends, who were born and raised in California, recently decided to move out of the state. 

Then, when getting the car serviced at the dealership we've used for more than 15 years, where the same woman has been the Service Manager, she shared that they have been installing more trailer hitches than ever before as people want to pull a trailer because they are moving out of state. 

Next, while doing a routine visit with my doctor and without prompting, shared that each week he has clients telling him they are moving out of California. So, together these experiences are casual indicators that more people are heading for the California exit. 

Several large companies have discussed plans to move out of California:

  • Tesla purchased a large area of land outside of Austin, Texas. Elon Musk made it very well known how unhappy he was with Alameda County over the closure of the Tesla Factory in Fremont earlier this year. He made statements that he plans to move future manufacturing out of the Fremont plant in California.
  • Charles Schwab is moving their San Francisco headquarters to Westlake, Texas.
  • Palantir is moving their headquarters from Palo Alto to Denver, Colorado.
  • Jeffrey Gundlach, founder of DoubleLine, said that he is considering moving his company out of California stating frustration over “incompetent governance” and “massive income tax increases.”1
  • California has some of the most restrictive rules in the US limiting business activities due to COVID-19.
  • California has three of the top five cities in the US (San Francisco, San Diego, San Jose) with the most business closures since March based on Yelp data2.

California Migration: Who left? Where did they go and why?

Net migration is defined as the people moving into the state versus the people moving out of the state. It does not include the change in population due to births or deaths inside the state.

Below is a map of California that shows the net migration by county3. The yellow shaded counties are with more out-of-state transplants who moved to the state and the blue shaded counties are where more people exited the state.
 

 
You can interact with the map to understand the specific migration volumes. In our county of Santa Clara, 20,417 more people left the state than arrived. Los Angeles had the greatest exodus of 97,835 people who left the state.

When people leave the state where do they go? 691,145 left the state in 2018. A study was done to understand where most Californians migrated4. The states were ranked from lowest to highest in net migration. The interactive map below shows us where most Californians moved to in 2018.
 

  
The yellow top tier rankings of 41 – 50, indicate most migrations were to the western states of Utah, Colorado, Idaho, Washington, Oregon and Nevada. Still other people moved further east and south to North Carolina and South Carolina, with Arizona and Texas ranking highest.

Some reasons why people leave California include:

  • Housing costs are among the highest in the nation.
  • High taxes with a 13.8% top state tax rate. Other states have a lower state income tax and some states like: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, have no state income tax.
  • Wildfires are on the rise and have caused poor air quality throughout the state. There is now a “wildfire season” causing smoky air for 3 months of the year.
  • Increase in homelessness of 22% in California in the past decade and 27% of homeless people in the US are in California5.
  • California state politics heavily dominated by one party.

Is the California exodus a long-term trend?

We are finding the COVID-19 pandemic is accelerating previous trends, such as online shopping. We think that the pandemic may also accelerate the trend of working from home.

With companies approving employees working from home, it has enabled people working for the large California tech companies to move to lower cost regions. It has created a label of “Zoom Town” to describe communities that are well suited for people to work from home, with a low cost of living and fast internet access.

The Metropolitan Transportation Commission (the group that does the transportation planning for the nine-county San Francisco Bay area) passed their 30-year plan this past week to mandate companies have 60% of employees working from home. In a recent survey, 40% of the Silicon Valley based tech workers said they would move to a less expensive area if they were allowed to permanently work from home6.  

There are lots of reasons to stay in California!

California is one of the most beautiful states. An alternative to moving away is to be more active in government by voting, communicating with your representatives and volunteering. The challenges can be met if we actively work on improving things rather than stand by and watch them decline.

We hope you will increase your participation in improving your community. There is plenty do to do so it’s a matter of finding what suits you best – donate, participate or both!

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References:

1 Institutional Investor – Jeffrey Gundlach Ponders Moving DoubleLine Out of California

2 San Jose Spotlight – ‘I know their pain’: Study confirms toll of shutdowns in San Jose

3 CalMatters – California Exodus: An online industry seizes COVID-19 to sell the Red State Dream

4 Leaving the Bay Area – CA Migration Data: 2018

5 Homelessness Policy Research Institute – State of Homelessness in California Fact Sheet

6 Business Insider – More than 40% of Bay Area tech workers would leave the area for somewhere less expensive if they were asked to work from home forever, a new survey found