Escape to the Countryside

Rural areas grow as state loses population

south valley aerial view Morgan Hill has maintained a rural feel in a populous county known for mega-developments. Photo credit: Shutterstock

This summer, Californians worried about the cost of housing were offered the rarest of gifts: a glimmer of hope.

New numbers released by the Newsom administration show that California added homes to its housing stock at a faster clip than any time since the Great Recession—123,350 additional units, or an increase of 0.85%.

Over that same period, the state’s population declined, marking the third year in a row that it’s fallen from one new year to the next.

Put those two numbers together and a surprising statistic emerges: There are now more homes per person—3,770 units for every 10,000 Californians—than there have been since at least 1991.

For a state that has long suffered from too many people trying to cram themselves into too few homes, that’s an encouraging number at first glance.

It’s also the kind of news that might lead a person to wonder: Does this California exodus mean the state’s perennial housing shortage is finally coming to an end?

The long answer is “it’s complicated.”

Though many analysts have tried, no consensus exists on just how many more homes the state would need to build (or how many more people would need to leave) before we can call an end to the crisis and start to see rents and home prices fall within reach of working and middle class Californians.

But the short answer is “almost definitely, no.”

Much of the outflow of residents is itself driven by the high cost of living. In June, the median price of an existing single family San Fran-cisco Bay Area home was $1.3 million, more than three times the national median of $410,000.

In Morgan Hill, the median price in July was nearly $1.5 million, while Gilroy stood at $1.1 million and San Martin at $2 million, according to data from the Santa Clara County Association of Realtors. In San Benito County, the median price was $775,000, according to MLSListings.

Gov. Gavin Newsom said as much in a recent interview with UCLA’s Blueprint, naming the cost of living as the “principal driver” and its chronic shortage of homes “our original sin.”

And while experts don’t agree on exactly how much additional housing the state might need to attain an ill-defined “affordability,” they do agree on this much: it’s a whole lot more.

A moving target

The numbers have been moving in a more encouraging direction in recent years.

The totals since 2020: roughly 430,000 new homes and some 821,000 fewer Californians competing to reside within them. That necessarily narrows the gap, how-ever we define it, said Hans Johnson, a researcher at the Public Policy Institute of California.

New housing developments in Hollister and a comparatively affordable area have boosted the population in San Benito County. Photo credit: Tarmo Hannula

If the shortage is relatively modest, he said, and “if we continue like this for another decade, with very slow population growth or essentially no population growth, and with fairly robust housing construction, then it should start to eat into that lack of housing,” he said.

But if the state needs to hit millions of units, “we’re still a long, long way off,” he added.

That’s in part because the size of the hole is so large. But it’s also because the shortfall is “a moving target,” explained Len Kiefer, deputy chief economist at the Federal Home Loan Mortgage Corporation. The building industry booms and busts. Young Californians grow old enough to live out on their own while older ones begin to die off. And people’s housing wants and needs change, too.

How Covid forced lifestyle changes

A particularly dramatic driver of such change: the pandemic.

Eager to keep Covid at bay and seeking more space to work from home, Californians dumped their roommates when they could and sought out places to live on their own, resulting in a great “spreading out,” as analysts at the Public Policy Institute of California put it. The trend toward fewer people living in each home is nation-wide and long term. Over the last 40 years, the number of people living alone doubled across the country. But the pandemic put the trend on overdrive.

The rise of remote work and the desire to get out of confined spaces saw many people leave crowded cities and move to more rural, open areas, such as South Santa Clara County and San Benito County.

The median price for single-family homes in San Benito County, while nearly double the national average, is still half of that of the neighboring San Francisco Bay Area. Photo credit: Tarmo Hannula

A recent peer-reviewed article in Rural Sociology states that more than a third of rural counties in the U.S. grew from April 2020 to July 2021 after a decade of population decline.

The U.S. rural population grew by approximately 0.13%, or 77,000 residents, between April 2020 and July 2021, while urban areas only grew by 0.1%. Author Kenneth Johnson said it’s rare for the rural population increase to be larger than urban, or metropolitan, areas.

According to Census data esti-mates, San Benito County’s pop-ulation increased by 5.3% from April 1, 2020 to July 1, 2022, from 64,207 to 67,579.

However, Santa Clara County’s population dipped by 3.4% from the same time period, from 1,936,274 to 1,870,945. The county was among the top 10 in the state for numeric decline since the pandemic, according to the California Policy Lab.

At the same time, Morgan Hill and Gilroy, which are among the few places in the county that maintain a rural feel, had smaller declines of 1.1% and 2.6%, respectively.

According to the California Association of Realtors, the demand for single-family homes and suburban properties contin-ues to surge.

“Lifestyle changes prompted many families to seek larger living spaces and green surroundings,” the organization stated. “As a result, suburban areas saw acceler-ated growth.”

Whether Californians will begin clustering together again as Covid concerns ease is an open question. But there’s no sign that’s happening yet. By the beginning of 2023, with the worst of the pandemic presumably behind us, the number of Californians per household hit a record low of 2.77.

A shrinking population, driven largely by outward migration, provides an escape valve for some of that extra pressure, said Dowell Myers, a demographer at the University of Southern California. But based on analysis he and his col-leagues conducted for the California Association of Realtors, it’s easy to imagine demand for homes stay-ing strong, given how large the millennial generation is and how many are now reaching a baby-having, roommate-jettisoning age.

Plus, if the California exodus is a cure to the state’s housing shortage, it’s also a symptom, said Dowell.

“The ones who are older are leaving because they’re (homeowners) cashing in their gains,” he said of the nearly 8 million ex-Californians who exited the state last decade. “The young people who are leaving, we now think, are leaving because they can’t buy a house here.”

And even if those departures do ultimately alleviate the state’s scarcity of homes, it’s not the solution to the problem that anyone should want, adds Johnson from Public Policy Institute of California.

“I don’t think any of us who have been advocating for building more housing in California—to help alleviate the shortage of housing we’ve had and to improve affordability in the state—thought that the best path was just to have the state start to depopulate.”

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