The economics of leaving California

Housing costs: the dominant driver

Ask people why they're thinking about leaving California, and plenty of answers come up — politics, climate, family, jobs. But the single factor that shows up most consistently across research is housing cost. A Public Policy Institute of California (PPIC) report, 'The Politics of Leaving California' (October 2022), found that high housing costs hit middle- and lower-income households hardest, and that a meaningful share of residents across the political spectrum said high housing costs made them seriously consider leaving the state.

What's notable is that this isn't a partisan phenomenon confined to one side of the aisle. In the PPIC survey, about 26% of very liberal residents, 39% of moderates, and 45% of very conservative residents said housing costs made them seriously consider leaving. The intensity varies by political identity, but the underlying pressure — a mortgage or rent payment that consumes an outsized share of income — touches nearly everyone who isn't already a long-time, lower-basis homeowner.

This matters for how you think about your own decision: if housing affordability is the single biggest line item pushing you toward the exit, it's worth running the actual numbers (see our cost of living comparison) rather than assuming the math works out just because headlines say everyone is leaving.

How many people are actually leaving?

The scale of the outflow has been large enough to show up in state-level population statistics, not just anecdotes. A Stanford Institute for Economic Policy Research (SIEPR) policy brief, 'California's population drain' (October 2023), reported a net loss of about 407,000 residents to other states between July 2021 and July 2022, and noted that California's total population declined in both 2021 and 2022.

That two-year decline was notable because California had grown in nearly every year for decades before that. A net domestic migration loss of that size, combined with slower natural population growth and reduced international immigration during the pandemic years, was enough to tip the state's total population into decline.

Where are people actually going?

According to SIEPR's analysis, Texas has received the largest absolute number of former Californians of any destination state. Arizona ranks second in volume, but shows a much deeper demographic footprint relative to its size: about 15% of Arizona's population has previously lived in California, compared with roughly 5% of Texas's population. Nevada is also a consistent top destination.

The Arizona figure is a useful reminder that raw migration counts and cultural/economic footprint aren't the same thing. Texas absorbs more people in sheer numbers because it's a much larger state with multiple major metros; Arizona, being smaller, feels the influence of California transplants more intensely as a share of its population.

Who is actually leaving?

It's tempting to assume outmigration is mostly lower-income residents being priced out, or mostly wealthy residents chasing lower taxes. SIEPR's research suggests the real picture is broader: people are leaving across all income levels, and a larger share of recent leavers hold college degrees than was true of past migration waves.

That matters for how you read the broader narrative. The departure of highly educated, often higher-earning residents raises different questions for California's tax base and labor market than a wave of departures concentrated only among lower-income renters. Both groups appear to be represented in the data, which is part of why this topic resists a single tidy explanation.

Taxes, framed honestly

Taxes are one of the most cited reasons for leaving California, and it's true that California's state income tax rates are among the highest in the country for upper incomes. But SIEPR's comparison with Texas is a useful corrective to an oversimplified story: California's income tax is high, while its property and sales taxes are comparatively lower than in some popular destination states, including Texas.

In other words, 'Texas has no income tax, so it must be cheaper' is not automatically true for every household. Your actual total tax burden depends on your income level, the value of the home you'd buy, and how much of your spending is subject to sales tax. A high earner with a modest home and modest spending may save significantly by leaving; a more moderate earner buying an expensive home in a high-property-tax state may see much smaller net savings, or even come out behind in some years.

If you want the fuller picture on how California treats residency, exit timing, and lingering tax obligations after a move, see our California exit tax guide.

• Income tax: California's top marginal rate is among the highest in the US for high earners.
• Property tax: California's roughly 1% base rate, combined with Prop 13's cap on annual assessment growth, is relatively favorable for long-time homeowners compared with some destination states' higher rates.
• Sales tax: varies by state and locality; compare your typical spending pattern against the destination's combined state and local rate.

Wages, jobs, and why people also move in

California's outmigration story has a counterpart that's easy to lose in the headlines: people still move to California, often for specific industries where the state remains a global hub — technology, entertainment, biotech, and certain parts of finance among them. Wages in those sectors can be high enough to offset California's cost of living for some workers, even as the same cost of living pushes others out.

Remote work has changed this calculus for a meaningful slice of the workforce. Workers who can keep a California-level (or national-company-level) salary while living in a lower-cost state get the clearest version of the arbitrage that outmigration numbers partly reflect. Workers whose jobs are tied to a specific regional employer or require in-person presence don't have that option, and their decision to stay or go looks different.

Business relocations and headquarters moves add another layer. When a company moves its operations or headquarters out of California, the effect on workers varies — some get relocation packages and move with the company, some find new local jobs, and some have an added reason to consider leaving the state themselves.

Home insurance and climate-risk costs

California's home insurance market has faced well-publicized strain in recent years, with insurers limiting new policies or declining renewals in higher wildfire-risk areas, and more homeowners relying on the state's FAIR Plan as a result. This has become a real and growing cost line for homeowners in affected areas, and it factors into some households' decisions to sell and relocate.

It's worth noting this isn't a reason to assume insurance is automatically cheaper everywhere else — destination states carry their own climate-driven insurance costs (hurricane and wind risk in the Gulf Coast and Southeast, hail and tornado risk in parts of the Plains and Midwest). The specific risk profile changes; the need to budget carefully for it does not.

The hidden costs of leaving

The financial case for leaving California often focuses on the ongoing savings — lower home prices, no income tax, cheaper everyday costs. It's easy to underweight the one-time and structural costs that come with actually leaving.

• Selling costs: real estate agent commissions, repairs, staging, and closing costs can run into the tens of thousands of dollars depending on your home's value — see selling your California home for the full breakdown.
• Losing your Prop 13 basis: if you've owned your California home for years, your property tax is likely calculated on an assessed value well below current market value. Moving resets that, and your new state's property tax will be based on your new purchase price at its own rate.
• Moving costs themselves: packing, transportation, and sometimes temporary housing or storage are a real, often underestimated, one-time expense.
• Career networks and professional relationships built over years in California don't automatically transfer, and rebuilding them in a new market takes time that has its own cost.

What California still offers

It's worth being honest about the other side of the ledger. In the same SIEPR research on migration attitudes, weather stood out clearly: about 45% of respondents said California's weather was better than their comparison state, versus about 15% who said the same of Arizona and 11% who said the same of Texas. Climate and quality-of-life factors like this don't show up on a spreadsheet the way a tax bracket does, but they're a real part of why many Californians who could leave financially still choose to stay.

Will moving actually save you money?

All of the factors above — housing, taxes, insurance, wages — net out differently for every household. Before you treat 'moving will save money' as a given, it's worth running your own numbers rather than relying on a state-level average.

Planning your move