Could the sun be setting on the Golden State? Kanye West, Nicole Kidman, Ryan Reynolds, and Matthew McConaughey are some famous names that have chosen to leave LA, and they are not alone.
In 2018, more than 690,000 Californians left the state, and the numbers are growing. “Big deal” you may say; “people move in and out of places all the time.” However, California is one of the few states that are experiencing a net decline in migration. The Department of Finance found that “for the first time since the 2010 census California has had more people leave the state than those moving in.”
So, what’s the deal? Taxes, wildfires, power outages, traffic? What has made the state of fair weather, fashion trailblazers, and fan-adorned superstars lose their residents?
Taxes
California has the highest taxes in the nation! Literally, they are the best when it comes to taking your paycheck. The base sales tax of 7.25% is the highest in the nation. Its top marginal income tax rate of 12.3% is the highest in the country.
Between high sales and income taxes, both the poor and rich get hit. If you can afford to pay the high sales taxes, you’ll be slammed on your income tax. On the other hand, if you can escape the high-income taxes, you still pay an average of $3.17/gallon at the pump.
However, there is one group that is hurt the most: businesses. Throughout California, companies are fleeing at alarming rates, making it more difficult for Californians to find jobs. The result: California’s unemployment rate is the 5th highest in the nation.
Toyota, Charles Schwab, and Jamba Juice have left the state to escape high prices, and the people are following. California investor Joe Lonsdale wrote in an article for the Wall Street Journal “investments follow the talent. We’re betting that the future of America is going to be built in the middle of the country, in places with good government and a reasonable cost of living.”
Housing & Zoning Laws
The average cost of buying a home in America is estimated at $295,300. California’s average shatters this number, currently estimated at almost $580,000! Only Hawaii had higher prices.
“Well, I’ll just rent” you may say. Think again. The median monthly cost of rent is over $1,300/month, leaving only Hawaii and Washington DC as places where you could pay more.
California dreamers will chalk this up to “the cost of luxury”. This is ironic because high rent and home owning costs prevent one thing: building wealth. Owning a home is one of the strongest investments you can make. If you can only afford to rent a small, smelly, and overpriced apartment, you waste years of building credit.
Additionally, zoning laws make it difficult for middle and low-income workers to live in major cities. Not only are middle-class Californians moving further from the city, but the cost of commuting is high, traffic is awful, and with businesses leaving, there may not be a job to commute to.
A Fading Future
With the number of high-profile companies leaving California, you may think the people leaving are billionaires. In fact, the opposite is true. According to the California Internal Revenue Service, “departing Californians tend to be younger and poorer — households whose breadwinners are under 35 years old and making less than $50,000.”
While these people do not contribute to large tax revenues, they are the backbone of a strong economy. A healthy and abundant workforce controls labor costs and provides labor. If California wants to be a place of opportunity, people have to know that they can be in California for the long-haul, something the young, poor, middle-class, and investors have little confidence in.
Additionally, we are dealing with a pandemic and regardless of when we recover, the future of work is going remote. If employees can work in Los Angeles and not have to live near Los Angeles, why would they pay the cost? When polling tech workers, one study found “up to 40% of Bay Area tech workers will consider leaving if remote work continues.”
Business owners, investors, and entrepreneurs, you must begin thinking about your future. If you want to salvage company culture, have a diverse team, and create a community-minded corporation you must do one thing: move with the people.
The Answer
So where are they going? You might think the suburbs, Arizona, Nevada, or Oregon, but there is one place receiving an explosion of Californians: Texas. When it comes to state migration patterns, Texas is receiving more Californians than California’s neighbors. Why? Texas has the solutions to Californians’ problems.
High state taxes? Not in Texas. Texas is one of seven states that has no income tax, as in 0%. Additionally, the Central United States location provides better access to the rest of the country. Companies like AT&T, American Airlines, and Toyota have made Texas their home, and Texans are capitalizing. Texas now had the 2nd largest civillian workforce in America.
Remember how expensive it is to buy a home in California? In Texas the average cost of owning a home is $213,000. That is lower than the national average and better than California prices by over half. If you can afford a $500,000 home in California, imagine what type of home you could buy in Texas.
Also, with lighter zoning laws Texans are able to live closer to major cities and save time on their commutes.
Speaking of commutes, how is the traffic? According to Business Insider, Houston, Dallas-Fort Worth, San Antonio, and Austin are some of the largest cities, but none of them ranked in the 15 worst commutes. Compare that to California who had 6 cities land in the top 15 worst commutes.
How does Texas fare for young and low-income workers? Well the Texan Median Age is 34.4 years old, younger than California’s and the national average. Additionally, Money Under 30 released an article titled: The 20 Best Cities to be Young, Broke, and Single. Texas had 3 cities rank in the top 20, with Austin winning the #1 spot.
We’re Ready to Help
People are flocking South and for good reason. Today’s Gold Rush is not in Los Angeles, San Diego, or in San Francisco; it is in Houston, Dallas, and Austin. California is becoming older, more expensive, and more economically divided by the day. Don’t get left behind!
At Republic Realty Advisors, we can help you make the move. We are licensed throughout the state and can find the office, studio, restaurant, or building that will save you money. Come join the thousands that are choosing Texas as their new home.