LIVABLE CALIFORNIA

PRESENTATION BY JOEL KOTKIN, CHAPMAN UNIVERSITY APRIL 18, 2020

What is a City for?

“a city comes into being for the sake of life, but exists for the sake of living well.” ---Aristotle

The Challenge of California Feudalism: Distorting the Property market and the economy

• Concentration of property in a few hands• Politics dominated by theology or ideology• Lack of Upward mobility• Decline of middle class• Stagnation and poverty widespread• The crux of the issue: low wages and high prices• Will Covid make it worse?

3

Housing87.4%

Goods5.8%

Services6.8%

Estimated from Bureau of Economic Analysis & American Community Survey Data

Housing Share of Excess Costs of LivingMOST EXPENSIVE UNITED STATES MARKETS: 2017

Metropolitan areaswith cost of living

10% or more abovethe national average.

0123456789

1011

1950 1960 1970 1980 1985 1990 1995 2000 2005 2010 2015

Med

ian

Mul

tiple

(Pric

e/In

com

e Ra

tio)

Coastal CaliforniaInterior CaliforniaOutside California

California & the United States ComparedMIDDLE-INCOME HOUSING AFFORDABILITY: 1950-2019

Derived from Census Bureau, Harvard University and Demographia.

Includes 53 Metropolitan Areas1,000,000+ (2015)

COASTAL CALIFORNIALos Angeles, San Francisco,

San Diego & San JoseINTERIOR CALIFORNIA

Riverside-San Bernardino,Sacramento

2.02.5 2.6

2.2 2.02.5 2.7

2.4

3.7

7.3

9.0

5.5 5.7

7.7 8.4

8.8

0

1

2

3

4

5

6

7

8

9

10 19692018

Change in House Values v. IncomeMEDIAN MULTIPLE: 1969-2018

Derived from US Census, 1970 & American Community Survey, 2018. Figure 6

-58.8%

-10.0%

-33.2%

-21.9%-26.5%

-23.8%

0.1%

-38.9%

3.7%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

LosAngeles-

InlandEmpire

SanFranciscoBay Area

San DiegoMSA

SacramentoMSA

San JoquinValley

CentralCoast

SacramentoValley

California:WeightedAverage

(DisplayedAreas)

Balance US

Change In Percent of Population Able To Afford Median- Priced Home In 2018 Compared to 2000

California Regions, Compared to U.S

Source: Derived from NAHB Wells Fargo Housing Opportunity Index

53.7% 54.8%56.8% 58.3%

61.7% 61.8% 61.8% 62.5% 62.5% 62.8%

0%

10%

20%

30%

40%

50%

60%

70%

Lowest Homeownership Rates By State -2018

Source: American Community Survey, U.S. Census Bureau

$231

$5$0

$50

$100

$150

$200

$250

Owner Renter

Med

ian

(000

s)

Figure 9

Household Net Worth by Housing Tenure2016

Source: Federal Reserve Survey of Consumer Finances

24% 23% 25% 28% 26%17%

28% 29%34%

33%27%

23%

-10%

0%

10%

20%

30%

40%

50%

60%Some ConsiderationSerious Consideration

Considering Moving Out of California?REGISTERED VOTERS BY AGE: SEPTEMBER 2019

Source: UC Berkeley IGS Poll

71%58%

47%38%

14% 13%26%

-5%

5%

15%

25%

35%

45%

55%

65%

75%

Why do Californians Want to Leave?REGISTERED VOTERS BY ETHNICITY: SEPTEMBER 2019

Source: UC Berkeley IPSOS Poll Figure 11

In the Decade from 2008 to 2018 5 Times More Below-Average Paying Jobs Were Created Than Above Average Jobs In California

1,578,825

263,610

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Jobs Gained in Industries Paying Below 2018 Average PayLevel

Jobs Gained in Industries Paying Above 2018 Average PayLevel

California Jobs Created 2008-2018 Above and Below Average Annual Pay LevelSource: U.S. Census

• 86% of the Jobs Added Were Under The Average Pay• 48% Pay Under $40,000• Net Loss of Middle-Income Jobs

2018 CA Average Annual Pay ForAll Private SectorJobs: $ 78,668

267,908

(4,298)

690,077

881,677

-100000

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

Number of Added JobsPaying More than 100K

Number of Added JobsPaying Between $78K and

$100K

Number of Added JobsPaying Between $40K and

$78 K

Number of Jobs PayingUnder $40K

Number of Jobs Added in California By Pay Range, 2008-2018

Above Average Paying, Mid-Skilled Job Creation By State – Percent Change In Past Decade

California Has Been Among The Leaders In Creating Low Paying (under $40K) Jobs

The Big Shift is On

• Large movement to suburbs and affordable cities• Demographic factors• Economic factors• Social/environmental factors

0

100

200

300

400

500

600

1800

1850

1900

1950

2000

2010

Popu

latio

n pe

r Hec

tare

(U

rban

)

New York

Los Angeles

Urban Footprint Densities: 1800-2010PARIS, LONDON, NEW YORK, BEIJING & LOS ANGELES

Angel et al and Demographia.

Paris

London

Beijing

Urban Core8.2%

Suburbs & Exurbs…

Derived from American Community Survey, 2014/2018 & City Sector Model

Urban Core, Suburban & Exurban GrowthMAJOR METROPOLITAN AREAS: 2010 TO 2014/2018

Figure 19

Middle Year: 2016

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

2011 2012 2013 2014 2015 2016 2017 2018 2019Major MSAs (Over1,000,000)Middle-Sized MSAs(500,000-1,000,000)MSAs 100,000 -500,000Smaller MSAs & NotMSAs

Figure 20

Net Domestic Migration 2010-2019BY 2019 METROPOLITAN AREA POPULATION

Derived from Census Bureau data

-600,000

-500,000

-400,000

-300,000

-200,000

-100,000

0

100,000

200,000

300,000

2011 2012 2013 2014 2015 2016 2017 2018

Core Counties

Figure 21

Net Domestic Migration: Core & Suburbs50 MAJOR METROPOLITAN AREAS

Derived from Census Bureau data

MSA’s comprised of a single county excluded(Las Vegas, San Diego, Tucson)

Center of Covid as well

87.5%75.0%

100.0% 98.9% 97.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Los Angeles MSA San FranciscoMSA

Riverside-SanBernardino

MSA

San Diego MSA Sacramento MSA

Shar

e of

Gro

wth

: 201

0-20

14/2

018

Suburbs &ExurbsUrban Core

Suburb/Exurb & Urban Core GrowthCALIFORNIA METROPOLITAN AREAS: 2010 TO 2014/2018

Derived from American Community Survey & City Sector Model

-30,000

-25,000

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

2011

2012

2013

2014

2015

2016

2017

2018

Ann

ual (

to y

ear)

San Francisco MSASan Jose MSABay Area ExurbsCentral Valley Exurbs

Bay Area CSA: Domestic Migration by MSA2010 TO 2018

Derived from Census Bureau Population Estimates 2018

BAY AREA EXURBSNapa MSASanta Cruz MSASanta Rosa MSAVallejo MSA

CENTRAL VALLEY EXURBSMerced MSAModesto MSAStockton MSA

-120,000

-100,000

-80,000

-60,000

-40,000

-20,000

0

20,000

40,000

2011

2012

2013

2014

2015

2016

2017

2018

Ann

ual

Los AngelesOrangeRiversideSan BernardinoVentura

Domestic Migration: Los Angeles CSA2010 TO 2018

Derived from Census Bureau Population Estimates 2018

-180,000

-160,000

-140,000

-120,000

-100,000

-80,000

-60,000

-40,000

-20,000

0

2011

2012

2013

2014

2015

2016

2017

2018

Net Domestic Migration: California 2010 TO 2018

Derived from Census Bureau Population Estimates 2018

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

2011

2012

2013

2014

2015

2016

2017

2018

International Migration: California 2010 TO 2018

Figure 27Derived from Census Bureau Population Estimates 2018

-0.05%

-0.16%

-0.26%

-0.18%

-0.31%

-0.26%

-0.35%

-0.30%

-0.25%

-0.20%

-0.15%

-0.10%

-0.05%

0.00% 0-25 26-34 35-44 45-54 55-64 65+

Figure 28

California Net Domestic Migration by AgeANNUAL RATE: 2014-2016

Derived from IRS data (Latest at 2019.11)

5.5%

11.2%12.4%

14.0% 13.4% 12.8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

UrbanCore:CBD

UrbanCore: Inner

Ring

EarlySuburb

LaterSuburb

Exurb OVERALL

Small Areas (Zip Code Analysis Zones)

Age 5-14 Population % by Urban Sector53 MAJOR METROPOLITAN AREAS: 2014-2018 (AVERAGE YEAR: 2016)

Derived from American Community Survey: 2014-2018.

-30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70%

Detroit Los Angeles

Chicago New York

Boston San Francisco

San Jose Seattle

Washington Denver Atlanta

Dallas-Fort Worth Houston

Austin Raleigh

Change in Child Population (5-14)SELECTED METROPOLITAN AREAS: 2000-2018

Derived from US Census Bureau data

1.0

1.5

1.2

0.4

0.8

1.3

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

United States California Oregon Washington Colorado Texas

Cha

nge

in Y

ears

Change: California Median Age: 2010-18COMPARED TO HIGH DOMESTIC MIGRATION STATES & U.S.

Derived from 2010 Census & American Community Survey 2018 Figure 31

The Future lies in the A rchipelago of V illages: Towards “Smart Sprawl”

• Housing near jobs• Emphasis on families but with big appeal to seniors

(grandparents)• Strong role for village shopping streets and markets• Provision of open space around the village core

and housing estates-• Solving the problem of “sprawl” within the Sprawl

Rethinking Density onEnvironmental Grounds

• Low/mid-density using proper design and landscaping may use less water and energy

• Reducing “heat islands” —overdense development in London and Los Angeles can lead to urban centers being 3°C higher than outlying areas

• Learning from mideasternancient cities like Shiraz in how to design largely low-rise housing to maximize natural cooling and reduce evaporation

• New Technology allows for dispersion to a more sustainable community

Forgotten Factor: Urban Heat Island

0

5

10

15

20

25

30

Core Inner Ring Second Ring Outer Ring

Met

ric To

ns

CO2 Emissions per Capita: By SectorAUSTRALIA 5 LARGE CAPITAL URBAN AREAS

Source: Housing Form in Australia and Its Impact on Greenhouse Gas Emissions

Telecommuting: A Big Part of the Urban Future

820,000915,000

824,000

1,111,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2010 2018

Wor

kers

TransitWork at Home

Source: American Community Survey

Job Access: Transit v. Work at Home2010-2018

Downtown San Francisco

8.4%

City of San Francsico:

Outside Downtown

7.1%

Bay Area: Outside City

of San Francisco

84.5%

Bay Area CSA Job Share by Work LocationDOWNTOWN, CITY OF SF & BALANCE: 2012/2016

Derived from CTPP 2012/2016 data (American Community Survey)

3

2353

161

16

156

0

20

40

60

80

100

120

140

160

180

City of SanFrancisco

Richmond(SF)

Bay Point (SF) City of LosAngeles

East LosAngeles (LA)

Willowbrook(LA)

30-M

inut

e C

omm

utes

: A

uto

X Tr

ansit Higher Poverty Areas

Core Municipalities

Auto 30 Minute Commutes Times TransitSAN FRANCISCO & LOS ANGELES METROPOLITAN AREAS

Derived from American Community Survey

0%

1%

2%

3%

4%

5%

6%

1980 1990 2000 2010 2018

Mar

ket S

hare

Market Share for Indicated Years Only

Transit

Los Angeles CSA CommutingTRANSIT & WORK AT HOME SHARE: 1980-2018

Derived from Census Bureau data

Los AngelesOrangeRiverside

San Bernardino& VenturaCounties

More Decentralization is LikelyFROM THE BAIN & COMPANY

From Bain & Co. Spatial Economics: The Declining Cost of Distance (2016)

58,600

39,700

2,000

8,200

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1950 2010

Are

a in

Squ

are

Mile

s

Land in FarmsUrban Land

Derived from US Department of Agriculture data

Agricultural & Urban Land: California1950-2010

Policy could try to reverse this process

• Bias against suburbs and peripheral growth drives housing policy• State tax policy makes it harder to build on redundant retail• Government and middle class at loggerheads in terms of aspirations• Most jobs and people move to suburbs, which the planning

community, much of academia and media despises• The result is ever higher prices and shift of resources to expensive city

core as development on periphery is stifle• Unless we accommodate the aspirations of middle and working

class, we could be headed to neo-feudalism --- or socialism