California Gov. Gavin Newsom boldly — and a wee bit desperately — ran ads last summer encouraging
Florida residents to relocate to California
. Housing affordability is one reason it probably won’t work.
Housing affordability has been a major factor driving Californians to states such as Texas and Florida, where they can realistically afford the American dream of owning a home.
Cost of living — which is mainly a housing problem — and taxes round out the
top motivations
for fleeing the once-growing states such as California. The states that win on housing affordability from free-market-oriented policy win overall.
Twenty years ago, few would have bet on a mass exodus of residents from the popular albeit highly regulated housing market in California. Issues related to land use, zoning, and bureaucratic chaos led to substantially higher housing costs.
The
five most expensive housing markets
nationwide are all within California. Further, a recent
Hoover Institution report
found that one of the top reasons companies leave California is “… high living costs, particularly the cost of housing affordability.” In the same vein,
C2ER
finds that California’s housing costs are about 1.7 times greater than Florida’s and 2.2 times higher than Texas’s.
This contributes to California
suffering losses
of big businesses (11 Fortune 1,000 companies) between 2018 to 2021, along with small, quickly growing companies.
Texas and Florida have figured out the secret to housing affordably through free-market policies that help entrepreneurs address challenges to build more homes in a safe, less costly manner.
The recent census report shows how Florida drew the
most net new domestic residents
(318,855), with Texas coming in second (230,961). Many people packed up and moved to states with “lower taxes, more affordable housing and a higher standard of living.” What’s more, Texas came in first in overall population growth (470,708), with Florida second (416,754).
These states are the ones that tend to let builders build more freely than the others. The
Wharton Residential Land Use Regulation Index
, one of the most respected analyses of the effect of regulation on price, shows a strong, positive correlation between house prices and over-regulation.
Take, for example, San Francisco, where it takes
861 days
to get a permit for one residential home. In Houston, it takes just
15 days
. That’s huge savings for homebuilders and, therefore, homeowners.
For Texas to remain competitive, it must guard against bureaucratic bottlenecks like those developing in Austin, where simply getting residential site plans approved now takes
one to two years
.
To remain prosperous, Texas must keep and improve on free-market principles, especially in housing. Otherwise, the resulting higher costs of living will force people and businesses elsewhere.
Florida has done a good job winning the war against excessive regulation to make way for more home construction. In 2019, the Sunshine State passed a law
allowing third parties
to help streamline the permitting process, alleviating wait times for home construction. In 2021, it passed a
shot-clock law
that effectively limited permit responses by cities to no more than 30 days.
It’s not complicated: The states and cities that will prosper in the coming decade will be those that allow a less regulated housing market so the quantity of housing supplied can efficiently meet the quantity demanded.
For states that plan to attract business while retaining residents, they must improve the regulatory environment for builders by getting out of the way.
This should include streamlining building regulations to make it easier to build new housing, reforming land use policies to encourage development, and sorting out the bureaucratic bottleneck that complicates the building process.
Like musical chairs, if you have fewer chairs than people, some people have to find a new home … or a state.
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Vance Ginn, former associate director for economic policy in the White House Office of Management and Budget, is president of
Ginn Economic Consulting, LLC
, chief economist at Pelican Institute for Public Policy, and senior fellow at Young Americans for Liberty. Nicole Nabulsi Nosek is the founder and chair of Texans for Reasonable Solutions.
