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The great Californian escape: Jobs crisis fuels mass population losses, people flee for a better life

Several significant issues in California have arisen since the start of the year, posing massive challenges for California Gov. Gavin Newsom and the state’s Democratic leadership. The state’s budget shortfall is just the latest addition to the mounting problems Californians face every day, as disappointment among residents continues to grow. The immigration crisis at the southern border, house prices, the house insurance market meltdown, and huge spending cuts recently announced by Gov. Newsom have made many Californians question the direction the state is headed.

A recent setback

Last month, a survey conducted by the Public Policy Institute of California showed that “only” 60 percent of parents still support Governor Gavin Newsom’s education policies, the lowest job approval rating Newsom has gotten since 2019. The study also found that this number is now 19 points lower than it used to be just two years ago. The situation for Newsom deteriorated this month shortly after he unveiled his latest budget proposal, as the California Teacher Association, a union with over 300,000 members and a longstanding ally, expressed their concerns about the proposed spending cuts in the education sector. The pressure from the educators resulted in Newsom’s decision to postpone the proposed budget cuts at least for a year.

Rising prices

In April, many businesses had to adapt to the new wage hike, resulting in increased prices on goods and services for most venerable Californians. Meanwhile, lawmakers are working on laws to allow higher house insurance prices very soon as insurance companies leave the state’s market. Just when everything has become more expensive, a recent survey found that rent prices in some areas across the state are going down. The reason – people are fleeing for a better life.

The details

Some of the major cities in California saw rental prices plunge amid declining demand as the areas saw population losses, according to the rental online platform Zumper. In May, Oakland experienced the largest decrease, with rents dropping over 9%. Sacramento wasn’t far behind, with an 8% decrease from the previous year. Out of 11 cities in California examined by Zumper, seven showed lower rents in May. In contrast, some cities outside of California are seeing rents rise by up to 29%.

Some of the major cities in California saw rental prices plunge amid declining demand as people flee some areas looking for better life
California Gov. Gavin Newsom, Courtesy of
California Governor X

People fleeing major cities

Nationally, the rental market trend is different from California’s situation. According to Zumper’s national rent index, the median price for a one-bedroom home rose slightly, exceeding $1,500, and two-bedroom homes jumped to nearly $1,900, also up by more than 1%. The decline in California’s rent prices can largely be attributed to fewer people living in urban areas. For instance, as people moved out of San Francisco, demand for housing decreased, which led to lower rents.

Data from the U.S. Census analyzed by RealPage shows a notable population decline in the Bay Area of San Francisco-Oakland-Fremont, which saw nearly a 4% decrease from 2020 to 2023. The Los Angeles-Long Beach-Anaheim area lost about 3% of its population, and the San Jose-Sunnyvale-Santa Clara area saw a 2.5% drop during the same time frame.

Some of the major cities in California saw rental prices plunge amid declining demand as people flee some areas looking for better life
Money, credit: Deposit Photos

It’s demand, not a supply issue

Zumper’s spokesperson clarified that low supply, which has been driving prices up almost everywhere across the nation, cannot be the cause of the declining prices. He attributed the problem to population loss in some of the major cities and surrounding areas, which corresponds with official population numbers. Less people means less demand for housing, eventually resulting in lower prices.

“It seems that it’s less of a supply factor that’s driving rents down in California, which is a trend that we’ve been seeing in a lot of other U.S. markets since there’s been record supply hitting the U.S. this year, but it’s more of a demand [issue],” Crystal Chen, a spokesperson at Zumper, explained to Newsweek.

Some of the major cities in California saw rental prices plunge amid declining demand as people flee some areas looking for better life
Business closed, credit: Unsplash

The jobs crisis fuels mass population losses, future doesn’t look bright

Zumper notes that the job market in some California cities hasn’t bounced back from the losses during the COVID-19 pandemic. Currently, Los Angeles has 60,000 fewer jobs compared to its pre-pandemic levels. This job deficit is due to severe lockdowns during the coronavirus crisis, which led to widespread business closures and layoffs. San Francisco also reports 45,000 fewer jobs than before the pandemic-induced economic downturn. Additionally, California’s unemployment rate stands at 5.3 percent, which is 1 percentage point above the national average, further weakening the rental market in the state, as per Zumper’s analysis.

This struggling job market might cause rental prices in Californian cities to keep decreasing in the future.

“The California economy isn’t doing the best right now and I think in the short term this trend will continue to happen where people are moving out of California since it’s so expensive to live here,” Chen added.

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