> “The reason why Texas and Florida are doing well and California isn’t, it’s the cost of housing and high taxes,” said Sung Won Sohn, an economist at Loyola Marymount University in Los Angeles. “We have lost a lot of small businesses.”
This former is the crux of the problem: California entered into a suicide pact with real estate speculators in the 70s, from which it seems entirely unwilling to extricate itself. It’s an incredibly destructive drag on the state’s entire economy that prevents new business formation and labor mobility.
Housing non-eviction laws and policies also are rough.
I tried to look for a home there once. I watched a homeowner break in with a ladder after being evicted then the realtor showed for the viewing then stole his ladder and left.
Another said their house was for sale but the garage was occupied by people who broke in and they could not be evicted until summer was over and before it became winter. The home owner was unavailable to speak to due to health issues related to the struggles.
Found a decent place then looked up the history of the property to find it had many owners and were re-sold due to a sober living halfway house next door.
I have several other examples and many news stories similar including long commutes, higher prices/taxes, etc made moving there or owning a home to rent out a non-starter.
Since we present tax burdens as a share of income as a relative ranking of the 50 states, slight changes in taxes or income can translate into seemingly dramatic shifts in rank. For example, Oklahoma (10th) and Ohio (24th) only differ in burden by just over one percentage point. Tax revenue growth during the pandemic, however, has not only increased overall tax burdens but also expanded variance among states. In our last pre-pandemic analysis, the 20 middle-ranked states differed by less than a percentage point on effective rate, but in 2022, the difference between New Hampshire (16th) and Maryland (35th) is 1.8 percentage points. While burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages: the state with the highest burden, New York, has a burden percentage of 15.9 percent, while the state with the lowest burden, Alaska, has a burden percentage of 4.6 percent.
This doesn’t quite ring true for me in Florida at least. Most recently, floridas cost of housing is raising ridiculously due to home insurance, with several homes refusing to be insured by anyone for any price. On top of that, assessments on condos and other buildings are raising the costs of high rises as well due to government regulations them to get inspected and implement necessary repairs (after HOAs and condos associations have been skimping on necessary maintenance for decades…)
Sort of? California's economy is shaped like a pyramid scheme in many regards, and land speculation is one of them. It also filters down into local tax revenue (housing prices must continually increase for municipalities to balance their budget, because of Prop 13), the type of industries that can be located there (only the most high-margin can survive the cost of living), the sort of folks who live there (who generally want to get rich quick or admit defeat and move home), and the public discourse (which is always hyping up the next big thing).
But in general the bottom of the pyramid lies outside California. All that money that eventually ends up in the pocket of California real estate speculators? Most of it comes from the pension funds and 401(k)s of ordinary workers in the rest of America, which invest in the darling companies of the day not realizing that everything is temporary. Those $2M ranch houses in Silicon Valley are bought by folks bringing in $500K in stock options per year, which is all fueled by their employers being worth $2T.
California's problem today is that we're between pyramid schemes. Most of the old-line web/mobile/marketplace schemes have reached maturity and are nearing collapse, but new pyramid schemes like crypto and AI are just getting started. Until the dollars start flowing in earnest California will likely teeter and stagnate at the top.
There’s also the cost of utilities (which are entirely out of control in the investor-owned utilities regions in CA, and the CPUC seems to be asleep at the wheel). This obviously drives up the cost of everything else.
And, for small businesses, there are the frankly rather silly taxes on small businesses. Want to be a small business doing business in the Great State of California? You will pay $800/year (minimum) for the privilege. Does the state get any value whatsoever from this?
Want to employ anyone? Prepare for a whole pile of taxes, each of which is small, but you need to do an utterly absurd amount of paperwork.
Would it kill the state of California to let a business employ someone and fill out one form and pay one tax?
As much as I love California doomerism, the "suicide pact" is fraying and we should appreciate that. Split roll for commercial property tax assessments only lost by 2% on the ballot in 2020 which is a winnable margin. There are many statewide bills passed and proposed for loosening regulation. The legislature is working on reforming outdated insurance regulations that have precipitated the current crisis, etc.
The state has problems but they are not as structural and intractable as most people want to be believe.
I've had several offers to work in startups in California that don't do remote. Instead of just saying no outright I ask the HR person where the office is or look it up. It's usually near Silicon Valley and I have to explain that they'd have to pay me CEO pay to make up for the increase in living/home expenses. I mean...$1.5M to get a home similar to what I paid $150k for not that long ago is hard to justify.
Living in SoCal still offers distinct advantages in terms of civil rights, a social safety net, and access to a vast number of small and large businesses (for both work and services). The entry-level job thing is compounded by requirements for degrees and experience that fully expect folks to down-skill to lower-wage roles.
One factor that looms large is the gig economy: Uber/Lyft/DoorDash/etc. They've become a lynchpin in providing delivery services that restaurants have come to rely on, while hitting both them and consumers with large fees. Pizza delivery is being shifted from actual drivers to gig workers, to avoid a recent law change requiring more pay; this has become an act of cost-externalization, and further increases the dependency on the gig workers. And overall the gig workers aren't necessarily seeing gains from this change, since their employers fight tooth and nail on efforts to increase their pay.
This doesn't even begin to cover what's happening in the agricultural and creative industries; the latter of which I believe has been covered writ-large in this space.
Not being beaten up by police is part of your rights, but freely deciding how you want to work with someone else, and not being forced into the gig economy, is a right too. Every state seems to have certain coalitions with way too much power, and in California it's exercised whenever well-established interests can rephrase something that benefits them in economically leftist language: "Let's all raise the wages of pizza delivery drivers (who work directly for managers who aren't using us as a minimum-wage-circumventing middle-man.)"
See also: "Supply and demand is a capitalist hoax, let's ban the construction of houses other than the ones I'm renting out."
Prop 13 is just a huge handout to real estate investors. There’s also the fact that mortgages are no recourse, so people have even more reason to engage in RE speculation. I’m not exaggerating when I say many of my close friends own a handful of properties as their main investment choice. How can you have anything close to a free market when speculation is rewarded so much?
I’m not saying prop 13 shouldn’t apply to primary residence, but it’s insane investors can just sit on land and use that as leverage.
a retired attorney in California said this recently.. (he is close to 80 so he recalls a lot of the context of Prop 13)
"Prop 13 is the worst thing to happen to California in a long time. It has lasting effects today. At the time, the press was full of 'tax fighter' stories about saving the poor old retirees from having their homes taken away sourced from Howard Jarvis Taxpayers Association among others. This is not the real story. The real story is that big corporations in California own land and do not sell it in practice. Prop 13 froze the property tax that Corporations pay at the same time as the homeowners."
Until California breaks the back of its landed gentry class (real estate investors and NIMBYs), job growth will remain nill. You can't pay 75k and expect people to live hand to mouth.
I realized after a while of living there that California is run as a real estate cartel. Land owners who bought when the state was cheap own it, and everyone who bought later is beholden and locked in with golden handcuffs to the high price environment they created.
I call it a cartel because the scarcity is 100% a policy choice. Density is not high, public transit is awful, and there is a ton of land left to develop on. Real estate in California is like diamonds from DeBeers.
If you aren't rich, don't stay there. All your surplus will go to landlords. If you buy at these high prices >50% of your income will go to servicing the mortgage and if the property market there ever does crash you'll be ruined. You’ve basically bought into a cartel.
I'd say for the Bay Area it's worthwhile to go to build out your career but if you aren't making at least $350k/year by age 35 leave.
Personally I’m glad I left because I loathe this property cartel and what it does to people and wouldn’t want to put my money into it.
IMHO the state has this totally fake reputation as a liberal “woke” place when in reality it’s a landlords kingdom. Texas is more progressive than California because a working class person can afford a home.
California as a whole is a great place to live but I have no idea how people manage.
My biggest hangup isn't jobs but housing. You have to be a millionaire to afford a small house far away from any city. And if you decide to rent instead, then even making 200k+ you are unlikely to afford a house at all. By the time you save up a million, housing prices increasing and inflation will push you back to square one. If you go through the debt route, interest and monthly payments will drain you dry for the rest of your life (unless your plan is to start your real life at 55+). I feel like high speed railways to desirable places like cali to affordable states will sove a lot of issues.
This is a little exaggerated. You can own a $1m home on 180k/yr at old interest rates. I am not a millionaire and bought a $1.2m property in the heart of LA.
bugglebeetle|2 years ago
This former is the crux of the problem: California entered into a suicide pact with real estate speculators in the 70s, from which it seems entirely unwilling to extricate itself. It’s an incredibly destructive drag on the state’s entire economy that prevents new business formation and labor mobility.
instagib|2 years ago
I tried to look for a home there once. I watched a homeowner break in with a ladder after being evicted then the realtor showed for the viewing then stole his ladder and left.
Another said their house was for sale but the garage was occupied by people who broke in and they could not be evicted until summer was over and before it became winter. The home owner was unavailable to speak to due to health issues related to the struggles.
Found a decent place then looked up the history of the property to find it had many owners and were re-sold due to a sober living halfway house next door.
I have several other examples and many news stories similar including long commutes, higher prices/taxes, etc made moving there or owning a home to rent out a non-starter.
ChuckMcM|2 years ago
Since we present tax burdens as a share of income as a relative ranking of the 50 states, slight changes in taxes or income can translate into seemingly dramatic shifts in rank. For example, Oklahoma (10th) and Ohio (24th) only differ in burden by just over one percentage point. Tax revenue growth during the pandemic, however, has not only increased overall tax burdens but also expanded variance among states. In our last pre-pandemic analysis, the 20 middle-ranked states differed by less than a percentage point on effective rate, but in 2022, the difference between New Hampshire (16th) and Maryland (35th) is 1.8 percentage points. While burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages: the state with the highest burden, New York, has a burden percentage of 15.9 percent, while the state with the lowest burden, Alaska, has a burden percentage of 4.6 percent.
SamoyedFurFluff|2 years ago
nostrademons|2 years ago
But in general the bottom of the pyramid lies outside California. All that money that eventually ends up in the pocket of California real estate speculators? Most of it comes from the pension funds and 401(k)s of ordinary workers in the rest of America, which invest in the darling companies of the day not realizing that everything is temporary. Those $2M ranch houses in Silicon Valley are bought by folks bringing in $500K in stock options per year, which is all fueled by their employers being worth $2T.
California's problem today is that we're between pyramid schemes. Most of the old-line web/mobile/marketplace schemes have reached maturity and are nearing collapse, but new pyramid schemes like crypto and AI are just getting started. Until the dollars start flowing in earnest California will likely teeter and stagnate at the top.
amluto|2 years ago
And, for small businesses, there are the frankly rather silly taxes on small businesses. Want to be a small business doing business in the Great State of California? You will pay $800/year (minimum) for the privilege. Does the state get any value whatsoever from this?
Want to employ anyone? Prepare for a whole pile of taxes, each of which is small, but you need to do an utterly absurd amount of paperwork.
Would it kill the state of California to let a business employ someone and fill out one form and pay one tax?
freitzkriesler2|2 years ago
California is dying because businesses can't pay their employees $75k and expect them to be able to afford a place to live.
shuckles|2 years ago
The state has problems but they are not as structural and intractable as most people want to be believe.
7thaccount|2 years ago
unquietwiki|2 years ago
One factor that looms large is the gig economy: Uber/Lyft/DoorDash/etc. They've become a lynchpin in providing delivery services that restaurants have come to rely on, while hitting both them and consumers with large fees. Pizza delivery is being shifted from actual drivers to gig workers, to avoid a recent law change requiring more pay; this has become an act of cost-externalization, and further increases the dependency on the gig workers. And overall the gig workers aren't necessarily seeing gains from this change, since their employers fight tooth and nail on efforts to increase their pay.
This doesn't even begin to cover what's happening in the agricultural and creative industries; the latter of which I believe has been covered writ-large in this space.
whatshisface|2 years ago
See also: "Supply and demand is a capitalist hoax, let's ban the construction of houses other than the ones I'm renting out."
readyman|2 years ago
[deleted]
VirusNewbie|2 years ago
I’m not saying prop 13 shouldn’t apply to primary residence, but it’s insane investors can just sit on land and use that as leverage.
mistrial9|2 years ago
"Prop 13 is the worst thing to happen to California in a long time. It has lasting effects today. At the time, the press was full of 'tax fighter' stories about saving the poor old retirees from having their homes taken away sourced from Howard Jarvis Taxpayers Association among others. This is not the real story. The real story is that big corporations in California own land and do not sell it in practice. Prop 13 froze the property tax that Corporations pay at the same time as the homeowners."
freitzkriesler2|2 years ago
ramesh31|2 years ago
api|2 years ago
I call it a cartel because the scarcity is 100% a policy choice. Density is not high, public transit is awful, and there is a ton of land left to develop on. Real estate in California is like diamonds from DeBeers.
If you aren't rich, don't stay there. All your surplus will go to landlords. If you buy at these high prices >50% of your income will go to servicing the mortgage and if the property market there ever does crash you'll be ruined. You’ve basically bought into a cartel.
I'd say for the Bay Area it's worthwhile to go to build out your career but if you aren't making at least $350k/year by age 35 leave.
Personally I’m glad I left because I loathe this property cartel and what it does to people and wouldn’t want to put my money into it.
IMHO the state has this totally fake reputation as a liberal “woke” place when in reality it’s a landlords kingdom. Texas is more progressive than California because a working class person can afford a home.
badrabbit|2 years ago
My biggest hangup isn't jobs but housing. You have to be a millionaire to afford a small house far away from any city. And if you decide to rent instead, then even making 200k+ you are unlikely to afford a house at all. By the time you save up a million, housing prices increasing and inflation will push you back to square one. If you go through the debt route, interest and monthly payments will drain you dry for the rest of your life (unless your plan is to start your real life at 55+). I feel like high speed railways to desirable places like cali to affordable states will sove a lot of issues.
carom|2 years ago
ldjkfkdsjnv|2 years ago
readyman|2 years ago
bdcravens|2 years ago
ShaylaRaegan|2 years ago
[deleted]
racheljaneville|2 years ago
[deleted]