LA Times: Leaving California is Golden

As discussed earlier today, Democrats may be facing problems in a few years thanks to all of the people choosing to leave blue states and move to red states instead. Over time, that reduces the number of electoral votes in those blue states as well as the number of people representing the state in the House.

There can be many reasons people decide to leave blue states but one of the ones often pointed to is taxation and another is affordability. It’s not a coincidence that some of our largest blue cities also have some of the highest home and rental prices. So does fleeing these cities really benefit the people who move to red states? 

According to a new paper from UC Berkeley’s California Policy Lab, the answer is yes. 

New data from UC Berkeley strongly suggest that for people of limited incomes who moved out of the Golden State, taking part in the California exodus can bring dramatically improved financial conditions.

The researcher studied the finances of people who left California over the last decade to see how well they did in their new communities. The California Policy Lab research covered people who left or arrived in California from 2016 to 2025 — millions in total. They generally left for nearby states such as Nevada and Arizona, but also for hot locales such as Texas and Florida…

Before leaving California, those who left paid on average $2,376 in monthly housing costs. After relocating to another state, former Californians spent just $1,705 per month, a drop of $671. Those who moved from other states to California saw the opposite impact, with costs rising a similar amount.

“Pretty much anywhere else is more affordable than California,” said White, the author of the report. “People were going to dramatically less expensive locations.”

Renters who moved out of California saved about 30% on rent but homeowners saved nearly 50% on their mortgages. As a result, people who leave where more likely to become homeowners somewhere else:

Our data allow us to anonymously track movers during the years after they leave California. We can then compare their financial outcomes to those that choose to stay in California and to those that move into or within the state.

So what happens to Californians who leave? If people relocate for more affordable locations, one might expect to see some improvement in their financial condition over time. One proxy for financial success is owning a home, something that has become increasingly difficult for young Californians to do because of high home prices.

We find that Californians who left the state were much more likely to own a home a few years later (Figure 3). That likelihood grows over time such that seven years after leaving California, movers were 11 percentage points (or 48%) more likely to be a homeowner than those who stayed in the state, even after controlling for age.

Another surprising outcome of the research was the finding that it was actually more well-off people who were likely to leave California for someone else. And yet, these were people who were not quite as well off as the people living around them.

The average household leaving California is not poor in absolute terms, but they are relatively worse off than those around them. Colloquially, they show signs of not being able to “keep up with the Joneses.”

Compared to their neighbors, movers show several indications of worse financial health. For example, exiters had credit scores that were 17 points lower than people from the same neighborhood who did not move (Table 1). Exiters also owe $5,500 more (twice as much) in student debt than their neighbors and have 16% (or 3.6 percentage points) higher rates of credit card utilization, which suggests that their credit cards are more “maxed out.” Rates of homeownership were also 33% lower (or -11 percentage points) for exiters as compared to their neighbors. All these signals are consistent with the idea that exiters desire a quality of life that they cannot achieve in their old neighborhood.

It’s a pretty simple idea. You’re doing well enough to have a decent life in California but you’re always going to struggle to cross that line from renter to homeowner. The mortgage on that first house is just a bit more than you can comfortably afford. However, if you move to a nearby state like Arizona or Texas, your same salary will go a lot farther and you’ll be able to buy a nice house for the price of renting in California. So why stay?

The other half of the equation is the number of people who move to California. That number is also down from most states as people already living somewhere else look at the prices and decide they probably can’t afford the move.

Despite the media’s consistent focus on exits, a main driver of recent population trends was declining entrances to California. Forty-two states now send fewer people to California than they did ten years ago.

So the bottom line is that leaving the state (or not coming here in the first place) is a significant advantage to a lot of people. People aren’t moving to Arizona or Texas for better weather, they are moving for a more affordable and better lifestyle, something many blue states struggle to provide.

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