There’s a lot of love for California in the neighborhood where I live. My wife and I see it every time we go for walks. Our neighbors wear Dodgers hats and 49ers jerseys. Open garages reveal the California flag hanging on the back wall. Cars sport decals declaring “I ❤️ San Francisco” and other favorite cities.Tupac’s “California Love” could be our neighborhood anthem, yet we live in Arizona.

　　I like to ask our California transplants what brought them to Arizona. Overwhelmingly, they reply that California is simply too expensive, particularly with respect to housing. For the middle class, especially young families with growing households, the California dream has become a fantasy.

　　We talk about the housing crisis as if it is a national problem, but housing costs vary widely between states, and California tops the list. As of March 2026, themedian sale price of a California homereached a staggering $854,000, roughly double the national average. This has forced many Californiansto pack their bagsand search for a better—or, at least, more affordable—life elsewhere.

　　The California exodus is a harsh reminder that there are two ways to solve the housing crisis: the state can either facilitate housing construction, or it can say goodbye to its residents. If California cannot bring prices down by adding to the supply, population flight will eventually lower prices on the demand side. Although both possibilities would solve the immediate problem of housing costs, the downstream consequences of the second option could decimate California’s economy and produce ripple effects across the United States and beyond.

　　A Tale of Two Housing Markets

　　Houston and Detroit exemplify the “build-or-bye” dichotomy of the housing crisis. Houston’smedian home priceof $345,000 is 21 percent lower than the national median, and theaverage rentin the city is only $1,184, or 28 percent lower than the national average. In Detroit, theaverage rentis comparable to Houston’s, at $1,112, and themedian sale pricefor a home is even lower, at $104,000—albeit for a significantly smaller and older property. But while both cities boast low housing costs, they took very different paths to these outcomes.

　　Houston is a builder-friendly city. As the nation’s only major city without a zoning code, Houston’s uniquely flexible housing market makes it easy for developers to accommodate demand. The absence of building height restrictions, minimum lot sizes, and parking requirements, among other things, translates into enormous savings on housing costs. Nationally, according tothe National Association of Home Builders, zoning and building regulations account for an average of 40.6 percent of the cost of a multifamily development and add $93,000 to the price of a single-family home, but regulatory compliancein Houstonexplains only 7 percent of multifamily development costs and adds between $3,400 and $11,400 to single-family home prices.

　　Housing permits in Houston are issued by-right, usually within ten days of submitting plans. The city’s quick and painless permitting process keeps compliance costs low and allows construction to begin almost immediately. A multi-family project in Houston can often be fully completed in less time than it takes just to break ground in San Francisco or Los Angeles. Capital that might languish for years in California due to construction delays could, in the same span of time, be reinvested multiple times in Houston.

　　The low cost of housing in Houston is especially impressive considering that Harris County, where Houston resides, isthe third-largest and fastest-growing countyin the country. The city’s builder-friendly environment makes it easy for developers to balance supply and demand in a way that benefits existing homeowners, buyers, and renters alike. Because home prices remain roughly stable over time when accounting for inflation, Houston homes remain reliable stores of wealth, but forlong-term wealth accumulation, thechoice between buying and rentingis roughly equal, allowing financially conscious Houstonians to enjoy a wider range of housing options.

　　California is the most productive state in the country, but housing costs are hampering its ability to attract and retain the types of people that produce this wealth.

　　If Houston represents the “build” approach to lowering housing costs, Detroit reflects the “bye” approach. Detroit saw rapid population growth in the early twentieth century, when the Ford Motor Company was the nation’s largest employer. The Motor City was designed to accommodate 2 million residents, but after peaking at 1.85 million in 1950, diminishing manufacturing jobs led to gradual population loss. By the century’s end, Detroit’s population had been cut in half, and it lost another 300,000 residents following the 2008 crash. Economic decline and a shrinking tax base forced the city to declare bankruptcy in 2013.

　　With more people leaving Detroit than arriving, the demand for housing plummeted, and prices followed, but cheap housing is hardly a victory for a city nobody wants to live in. It may be easier to buy a house in Detroit than in Houston, but Houston homeownersremain in place for about a decade longer on average. Nor is there much incentive to buy a home that will fall in value, which likely explains why Detroit rents are roughly equivalent to Houston’s even though home prices are significantly lower. For seventy years, Detroit homes have been neither investments nor stores of value—they have been depreciating assets, much like the automobiles the city manufactured.

　　California is threatening to duplicate the Detroit model, as policymakers drive wealth and industry out of the state. Oakland home values have fallen by more than 11 percent over the past year, and it is not because the city has seen more housing construction. Los Angeles is experiencing similar declines in condominium prices as the city leads the nation in population loss. Unlike Detroit, though, the high cost of housing in California is itself a major catalyst for the exodus. 

　　The California Exodus

　　In liberal democracies, people vote in different ways. We vote with our dollars, signaling consumer preferences. This is the democratic side of the marketplace. The prospect of capitalizing on rising demand incentivizes entrepreneurs to expand the supply until profits return to normal levels. Economists call thiselasticity—elastic markets enable rapid adjustments to supply and keep prices in check.

　　The second way people vote is through the ballot box. Well-run polities strike a healthy balance between the ballot box and the market. The government supplies necessary public infrastructure and an institutional framework that enables entrepreneurs to respond to consumer signals.

　　Unfortunately, California’s housing market has lost all balance between political and consumer preferences. Since the 1970s, locals who want to maintain the status quo have used the ballot box to prevent developers from meeting the growing demand for housing. Economist William Fischel’s bookThe Homevoter Hypothesisexplains how existing homeowners are able to block new housing—to prop up their own home values, to prevent undesirables from moving in, to preserve the aesthetic character of their neighborhood, or for any number of other reasons.

　　Prospective residents can vote for more housing with their dollars, but because they lack access to the local ballot, homeowners dominate municipal elections and erect political barriers to housing construction.But nearly half of all California residents are renters, and as rising rents or life changes compel them to look for housing elsewhere, fewer people are willing to replace them. Housing scarcity and homevoter control consequently become self-reinforcing.

　　With localities throughout California preventing entrepreneurs from meeting the demand for housing, prices have skyrocketed and forced residents to vote with their feet. Freedom of movement is the last resort for people whose voices are ignored in both the ballot box and the market. It is why communist regimes have built walls to keep people inside their countries, rather than to keep them out, and why California hastoyed with the idea of imposing an exit tax on fleeing residents. For now, at least, Californians are free to leave in search of cheaper housing, and many are choosing to do so.

　　Far from an unintended consequence, California’s population decline wasthe deliberate goal of housing policyin the 1970s and 1980s. Following the publication of Stanford professor Paul Ehrlich’sThe Population Bomb, a growth-control movement swept California, and the anti-growth coalition believed the solution to global overpopulation was local housing policy. Cities invented new development fees to drive up construction costs, and hundreds of downzoning measures graced local ballots, allowing voters to impose onerous zoning requirements on new developments.

　　By the 1990s, housing had become remarkably difficult to build in California, but population growth showed no signs of slowing. Instead, new residents competed for the limited supply of homes, driving prices rapidly upward. With the middle class suffering from the rising cost of living, California’s anti-growth measures were finally bearing fruit. The new millennium heralded the beginning of California’s population decline, as net domestic migration turned negative for the first time in 2001.

　　Domestic migration patterns capture the scale of the California exodus better than bare population figures. When looking at domestic migration only, we discover a troubling trend:for the past twenty-five years, more people have left California annually than have arrived. In most of these years, California lost more than 200,000 net residents to other states.

　　Birth rates and foreign immigration have covered domestic losses so far, but this does not appear to be sustainable.California has seen a steeper decline in birth rates than most states, and aging Baby Boomers are certain to narrow the gap between births and deaths even further in the coming years. Foreign immigrants have done more to bolster California’s population, but tightening immigration restrictions are, for better or worse, delivering results, as evidenced byCalifornias total population decliningby 54,000 in 2025.

　　Although many factors can influence a person’s decision to relocate, housing is perhaps the largest driver of the California exodus. Currently, the strongest predictor ofnationwide migration patternsis housing costs, and California is certainly no exception. The California Policy Labrecently foundthat people who left the state overwhelmingly settled in areas with significantly lower housing costs, and they were 48 percent more likely to become homeowners after moving.

　　It may seem intuitive that people would gravitate toward more affordable places to live, but this has not historically been the case. People traditionally favor more expensive areas that offer greater economic opportunity. By the old standard, an economic powerhouse like California should always be drawing in more residents than it loses, as it did for most of its history. Instead, movers today are settling in cities with less opportunity and lower wages, and the economic implications extend beyond the Golden State’s borders.

　　The High Cost of Housing Scarcity

　　Harvard economist Edward Glaeser described cities as “our species’ greatest invention.” Cities attract wealth and talent, making it easier for like-minded people to connect and collaborate. The economics of agglomeration, as economists dubbed the phenomenon, explains how Athens gave us the philosophers who laid the intellectual foundations for Western civilization, how early-modern Florence produced so many of history’s greatest artists, and how Chennai, India, has become the “Mecca of chess,” churning out grandmasters with dizzying speed. By facilitating connections between talented people in specialized fields, cities produce value that vastly exceeds the sum of their parts. 

　　California’s Silicon Valley exemplifies the agglomeration economy. The collaborative genius of the valley’s tech workers has made San Francisco one of the world’s most productive cities, and high productivity translates into economic opportunity and rising wages. More wealth means that even when holding other variables equal, the cost of living in a city is naturally going to be higher than elsewhere. San Francisco’s consistent population growth between 1980 and 2019 demonstrates that as long as wages keep pace with living costs, productive cities will continue to attract talented, ambitious, and entrepreneurial individuals. Their efforts yield wide-reaching benefits by adding to the national GDP, producing innovative new technologies that improve our lives, and generally raising living standards.

　　Yet many workers are now relocating to low-productivity cities where they can enjoy a higher standard of living despite lower wages.Economists Chang-Tai Hsieh and Enrico Morettirefer to this migration pattern as the “spatial misallocation of labor,” which they directly attribute to “stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity.” They estimated that if housing policy in New York, San Francisco, and San Jose mirrored the typical American city, the rate of growth fornationalGDP would increase by 36 percent.

　　Hsieh and Moretti’s insights reveal how the high cost of housing in California makes the entire country poorer. California is the most productive state in the country, but housing costs are hampering its ability to attract and retain the types of people that produce this wealth. Even for tech workers who are able to work remotely while living elsewhere, the lack of proximity to their colleagues likely robs the entire world of additional collaborative innovations.

　　If the new migration pattern continues, businesses will eventually be forced to shift operations to where labor is more available. Texas is already experiencing windfalls from the California exodus, with both workers and prominent tech companies moving to Austin’s “Silicon Hills.” Unlike San Francisco, however, Austin embraced population growth by passing significant reforms to encourage housing construction.That’s proven enormously successful, with the average rent falling by 19 percent since 2021 after adjusting for inflation.If California wants to keep its citizens and businesses from saying sayonara, it might do well to follow suit.

　　Progressivism vs. Property Rights

　　The reason so many Californians are exchanging their flip-flops for cowboy boots is that Texas is actually achieving the outcomes that California politicians promise—and consistently fail—to deliver. Housing policy in Texas is guided by a political culture that values individual property rights and economic freedom. The byproduct of Texas’s individualistic culture is an institutional environment that makes it easy to build.

　　California policy, by contrast, is dictated by a progressive culture that disdains profits, lionizes “experts,” and demands an active government to address social problems. The result has been overbearing zoning codes, labyrinthine permitting processes, exacting environmental regulations, and expensive union labor requirements—all enormous barriers to housing construction. And many of California’s remedies—rent control, housing subsidies, affordability mandates—further exacerbate scarcity by making it more difficult for developers and landlords to operate profitably.

　　The trend holds true throughout the country. Progressive cities and states have meddled in their housing markets too much and for too long, creating artificial scarcity and driving up costs. If they want to keep their residents, and their prosperity, they must abandon progressive dogma and embrace property rights and economic freedom.