in summary
Gov. Gavin Newsom’s crusade against the oil industry over gas prices missed the larger point that the cost of almost everything in California is very high.
Why California is what it is — a state with an immense economy but equally immense socio-economic divisions — is the subject of ongoing academic, media, and political debate.
There is one factor, both cause and effect, that cannot be debated: California is an enormously expensive place to live and work. And if anything, the relatively high inflation that has plagued the national economy in recent years has compounded the anxiety Californians were already feeling as they struggled to make ends meet.
Gov. Gavin Newsom’s crusade against gas refiners, accusing them of price-gouging, is virtuously capitalizing on that fear by signaling to his constituents that he’s okay with pain in their wallets. However, the state’s high fuel prices are only a tiny fraction of the state’s high cost of living and its corrosive effect.
How high? Insure.com, a website that analyzes insurance costs, recently updated its comprehensive state-by-state guide to living expenses of all types, revealing that living in California costs 46.8% more than the national average – third highest behind Hawaii 85.5% and 54% in the District of Columbia.
Its high cost of living is the number one reason California, despite its world-class economy, has the highest functional poverty rate in the country, according to the US Census Bureau. Its supplemental poverty index is weighted by the cost of living, and California’s high cost, particularly for housing, determines the state’s ranking.
In addition, according to the Public Policy Institute of California, well over a quarter of Californians, including the near-poor, suffer from serious economic stress.
High cost of living, again particularly for housing, is also a major factor in the exodus of California’s population to other states and hence the recent population loss.
Columnist Dan Walters unpacks events in California every week.
“Since 2015, California has suffered net losses of over 500,000 adults citing housing as the primary reason, according to the Current Population Survey,” noted PPIC grantees Hans Johnson and Eric McGhee in a recent report. “About half of those moving out of the state will buy a home in their new state, while only a third of those moving to California will buy a home.”
California, despite its recent population decline, has several million housing units – the exact figure is often debated – not enough to house its population. Despite many government efforts to boost production, the supply/demand gap remains largely unchanged, putting upward pressure on rents and house prices.
According to World Population Review, the average rent in California at $1,586 per month is the third highest in the country, surpassed only by Hawaii and the District of Columbia, and at $538,500 also the third highest behind those two markets in average home price.
High home prices make home ownership an impossible dream for millions of California families, which explains why the state has the second-lowest proportion of families living in homes owned by them or their families at 54.6%. New York is the lowest at 53.6%, thanks to New York City’s rental-dominated housing market.
A new study by Moneywise, a website dedicated to consumer finance, shows that first-time homebuyers in California would have to put down the second-highest average down payment in the country, $98,904, beaten only by Hawaii’s $110,360.
California’s extremely high housing standards not only explain why so many residents are fleeing to other states, but also why it is so difficult for working-class families to build generational wealth through home ownership. It perpetuates the state’s dual economy — white and Asian Californian majorities in the upper class, and black and Hispanic Californians dominating the lower class.
Political talk about gas prices is really beside the point.
“I appreciate CalMatters’ balanced and in-depth reports, especially on topics that interest me most like housing and water.”
Ellen, Saint Paula
Featured CalMatters Member
Comments are closed.