When Do You Deem It an Exodus?

Mar 29, 2022

Quote of the Week

"Not even lip-service is paid any more to the god of progress. Instead, security - security from depressions, security from unemployment, security from progress - has become the supreme universal goal."

Peter Drucker, The End of Economic Man: The Origins of Totalitarianism

Big Picture

New US census numbers highlight the LA metro's biggest challenge - residents are leaving the region in record numbers.

From July 1, 2020 to July 1, 2021 179,757 domestic residents left the LA metro region. (160,000 residents left LA County and in total 367,000 left California)

The net loss was 159,621, when adding in international migrants of 4,023 and 17,366 more births than deaths.

The chart shows the entire picture - green is growth and purple is a loss.

What we know now is that outmigration from LA only continues increase.

Back in 2018 ~100,000 more residents moved out of L.A. County than moved in. Back then one-third of those movers remained in CA, with the lower-income and middle-income earners (less than $100,000 annually and ~75 percent of this population) ended up in San Diego, Sacramento, Riverside and the Inland Empire. Those making more than $200,000 mainly moved to the Bay Area.

The remaining two-thirds moved out of CA and the majority of residents were mainly lower-income households that were attracted to more affordable regions in nearby states, like Las Vegas and Phoenix. The high-income households, those making between $100,000 to $200,000, migrated to the Northwest and New York.

The odds are the current numbers will reflect the past trends of who is moving, except something new may be happening.

Prior to COVID population sorting was occurring, whereby migration patterns were increasingly concentrating skilled-talent and high-income earners in coastal cities while pushing the middle and working classes elsewhere.

Now a new report from the Milken Institute - 2021 Best-Performing Cities shows that more non-coastal regions are starting to pull in more highly-skilled and highly-compensated workers.

Milken's report is looking at a cities's economic vitality and as the chart shows it is happening outside CA more and more.

You have to go seven spots in to find a CA city. (Chart)

CA's usual standouts, including No. 24 San Francisco and No. 22 San Jose, dropped to Tier 2 of the index due to the high cost of housing and a strong negative shift in short-term job growth.

Notably, the center of gravity of the BestPerforming Large Cities—and many high-tech industries in general—has shifted from its traditionally dominant centers in California and Massachusetts to the Intermountain West and the South. (Chart)

What should come as no surprise is the fact that overall, high-ranking and upwardly mobile large cities performed better than the median on one- and five-year measures of housing affordability and short-term job growth.

I know a lot of people are tiring of hearing about housing, but we cannot escape the reality that L.A. County's economic future depends on it.

We will need to build roughly 800,000 residential units by the end of 2029, and nearly 478,000 of those need to be affordable to households who make 120% or less than the City’s median income.

The supply shortage is one reason why homeowners stay put, and the reverse is also true. Long homeowner tenure is one factor in the ongoing housing-supply shortage and the ultra-competitive market, with the number of homes for sale down nearly 50% from before the pandemic.

A new study by Redfin shows that when it comes to homeowners staying in their homes much longer than they did a decade ago LA is at the top of the list.

In the US the typical homeowner spends 13.2 years in their home. In LA it is 18.1 years, up from 13.6 from 2012. The data shows that seven California locales are among the top 20 in which people stay put longest.

Midwest cities — Chicago, St. Louis and Detroit among them — saw the greatest increases in tenure, while popular destinations like Las Vegas, Atlanta and Tampa, Fla., saw the greatest decreases. This week’s chart, based on the study, shows where people stay put the longest, as well as the local median sale prices.(Chart)

To further drive home the point, from my own research three years ago I found that:

By 2029 one out of every five of LA's residents will be seniors, and despite a rising cost of living, aging Angelenos are staying put. In 2017 CA only lost about 20,000 seniors to other states, less than 1 percent of the total senior population. Home ownership looks to be a strong factor in this data point.

In L.A. County 13.5 percent (472,000) of all housing units are owned and occupied by someone 65 years old and older and 372,127 of those owner occupied homes were purchased more than 30 years ago.

One thing that may reverse this trend. Recent changes to the Prop 13 law now allow seniors to transfer their lower tax rate to a new home and some believe that when this is more widely understood, California homeowner tenure could slide.

Where do we go from here?

The CA State Legislature is in year two of a two year session and I am track some of the bills that look like they can help address LA's housing shortage. Here are three that every Angeleno should be advocating for:

AB 2063 will address a barrier to affordable housing production and strengthen the state’s longstanding density bonus law by prohibiting local jurisdictions from imposing affordable housing impact fees on density bonus units. This bill only applies to the bonus units of a state density bonus project.

Assembly Bill 2234 will create a framework for developers and local jurisdictions to process residential building permits more efficiently and cost-effectively. This legislation will only affect construction-related approvals and permits that occur after a project has been approved for planning and zoning by the local jurisdiction.

SB 1369 would permit adaptive reuse of any commercial, office, public, or industrial buildings with an occupancy of 25% or less for housing by right. Adaptive reuse would be limited to residential units only or mixed use with at least two-thirds of the building designated for residential use. Local governments would have the authority to adopt implementing ordinances consistent with this purpose. The bill would also grant a bonus to projects seeking Infill Infrastructure Grants.

Leadership in the Community

Experience IGNITE22 will be hosted at AltaSea on LA's Waterfront on May 4 and 5 to bring together innovators who are shaping the 22nd century.

Entrepreneurs will have a chance to meet investors; industry leaders can discover emerging technologies; and researchers can explore market opportunities for their scientific discoveries. In addition to exploring technology exhibits and demonstrations on land and in the water. Around 400 attendees are expected this year across all revolving activities at IGNITE22, with more than 60 entrepreneur exhibitors. Event Program:

Insights from LA

Discussion about this post