California should fear high housing prices

By Brad Plumer,

Americans have been migrating from coastal states such as New York and California to Sunbelt mainstays such as Texas for quite some time now. But why? Are wealthy New Yorkers fleeing from oppressive tax rates? Are poorer residents in cities such as San Francisco being priced out? Alon Levy sifts through the IRS data to get a better sense of who are actually packing their bags. And most of the migration, it turns out, appears to involve middle-class families who are seeking affordable housing: “The people moving to the Sunbelt,” he concludes, “really are being priced out.”

Marcio Jose Sanchez/AP

A few noteworthy tidbits in Levy’s data: First, richer coastal residents, when they do leave, tend to migrate to other coastal states, not to the Sunbelt, suggesting that high taxes aren’t necessarily scaring them off. Second, in a state like California, the households that depart tend to be slightly bigger than households coming in—but still much smaller than the average household. As Levy notes, “This is only partially consistent with the explanation that those regions attract singles and [childless couples] and turn away families.”

Still, the main conclusion seems to be that housing policies on the coasts that make it harder to build and hence keep prices high are driving middle-class families southward. But why should California care? Ryan Avent, whose new book, “The Gated City,” makes the economic case for less-restrictive housing policies, offers a case study. In the 1990s, sky-high home prices appeared to have put a major crimp on the dot-com boom in Silicon Valley, as housing costs rose faster than wages and forced workers to leave the area. That, in turn, “reduced the potential economic impact of the tech boom” and—because those tech workers were unlikely to be quite as productive outside Silicon Valley—“reduced national productivity.”