Gavin Newsom was inaugurated as California’s governor in January 2019. Since then, California has lost nearly 57,000 jobs, while the rest of the country added over 6.7 million jobs. If California created jobs at that same rate, the number of jobs in California would be nearly 900,000 higher today since Newsom became governor.
California is losing jobs because it is losing people. Between July 2021 and July 2022, California experienced a net population outflow of 407,000, and California’s population is now lower than it was in 2010. Such a decline would have seemed unimaginable just ten years ago for a state that once defined the potential for what could be achieved, a state that grew from less than seven million in 1940 to nearly twenty-four million by 1980.
California is losing people because of its economic policies, which have increased the cost of living to a level that has become unaffordable for many. Only 16 percent of California households can afford the cost of the state’s median-priced home, which now stands at about $831,000. In contrast, nationwide affordability is about 36 percent. Only three of California’s fifty-eight counties have affordability that exceeds the national average, and those counties are remote, sparsely populated locations with few economic opportunities.
Ironically, affordability is lowest in areas with the highest paying jobs, such as San Mateo County in Silicon Valley, where the median-priced home exceeds $2 million, which in turn requires a qualifying household income that exceeds $500,000 annually. Here is a 1,000-square-foot tear-down, built in 1936, listed at $1.7 million in Belmont, California, a small town in San Mateo County that outwardly looks like any one of thousands of small US towns, except for its home prices. The listing above, which is being offered for its land value, would sell for well under $100,000 in look-alike towns across the country.
These affordability statistics are much too optimistic because they assume buyers can make a 20 percent down payment and pay other closing costs. For the median-priced home in the state, this requires cash up front of at least $180,000. This is a fantasy for almost all potential buyers who don’t already own a home. Nationwide, median net worth for families who rent is less than $10,000.
Newsom’s campaign focused on increasing housing affordability by significantly increasing California home building. When he began his campaign for governor in 2017, he said, “As governor, I will lead the effort to develop the 3.5 million new housing units we need by 2025, because our solutions must be as bold as the problem is big.” In his 2019 inauguration address, Newsom promised a “Marshall Plan” for California housing, referencing the large and rapid investments the United States made to help rebuild Europe after World War II.
But now, well into Newsom’s fifth year as California governor, the number of new housing units that have been permitted in California since Newsom took office is less than 15 percent of Newsom’s 2025 housing goal. In fact, housing permits under Newsom are virtually identical to those from preceding years. No “big bold solutions.” No modest, small solutions, either. And the reason is simply a lack of commonsense, functional governance.
California homebuilding is limited because of policies that impede construction and raise costs. This includes the California Environmental Quality Act (CEQA), which has been weaponized to block development. One CEQA lawsuit after another has been used to stop a 60,000-person planned community known as Tejon Ranch for nearly the last thirty years. It now appears that the development will never exist, as a judge ruled that the project’s last environmental impact report needs a redo, which would add years to the process.
Imagine fighting a thirty-year tidal wave of lawsuits to build what the state claims it wants more than anything—housing. Imagine being driven into financial ruin while the state sits by and lets one environmental lawsuit after another be thrown at you. Gavin Newsom wants “big, bold” housing solutions, but what developers would ever try to build something “big and bold” when they know they will be bankrupted before they receive permits?
It is widely agreed that CEQA needs substantial reforms. With a Democratic governor and Democratic super-majorities in both houses of the Legislature, revising CEQA should be straightforward. But the state’s Democratic Party is unwilling to make meaningful reforms to CEQA because its members do not want to confront the powerful environmental lobby, which views CEQA as untouchable and which views virtually any development outside of high-density building in urban areas as anathema. The state’s Legislature could greenlight Tejon Ranch. There is only one reasonable answer why it hasn’t.
Other components of the cost of living are also high in California, including electricity, which is the fifth most expensive in the country. Gasoline prices are the highest in the country by far, exceeding prices in other high-cost states, including Hawaii and Alaska, by 20 percent. California’s high gas prices reflect the country’s highest gasoline taxes and the unique gasoline blend used in the state. Refinery capacity within California has declined significantly, as old refineries have shut down and as the state makes it nearly impossible to permit new refineries. This means that distributors sometimes must import gasoline from South Korea, which obviously drives up costs significantly.
Instead of trying to expand supply, California passed a new “price gouging” law that allows the state’s energy commission to levy fines should it find that distributor profits are too high. In signing the bill in March, Newsom said, “With this legislation, we’re ending the oil industry’s days of operating in the shadows. California took on Big Oil and won. We’re not only protecting families, we’re also loosening the vise grip Big Oil has had on our politics for the last 100 years.” Ironically, Newsom never mentions that Big Oil, specifically Getty Oil, bankrolled his early business investments and is significantly responsible for Newsom’s economic success.
Newsom is in China this week to discuss climate change issues. Newsom stated, “California and China hold the keys to solving the climate crisis. As two of the world’s largest economies, our partnership is essential to delivering climate action for our communities and beyond.”
California accounts for less than 1 percent of global carbon emissions. It does not hold the key to reducing carbon emissions. On the other hand, China does, as it accounts for about 30 percent of global emissions. Roughly 70 percent of China’s emissions are from coal, which is perhaps the most carbon dioxide-intensive energy source. But there is no chance that Newsom will be lecturing the Chinese about coal. Rather, Newsom’s conversations with the Chinese will be carefully scripted and will focus on electric cars, whose batteries are often produced in coal-powered plants in China, and high-speed rail, which has been an abject failure thus far in California.
It is difficult to see Newsom’s China trip as anything other than an opportunity to be on the world stage to raise his national political profile. But as California bleeds people and businesses on his watch, Newsom’s inability to govern will be the issue that he will need to confront if he ultimately runs for national office. He will get a trial run next month when he debates Republican presidential candidate Ron DeSantis, whose state of Florida became home to 29,000 Californians between 2021 and 2022, while just 5,000 Floridians moved to California during that period. I would hate to defend losing nearly six people for every one person who came to California. But that is exactly what Newsom will have to do.