Lock-Out From Prosperity

California is a fortress of gentrification.
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California is a fortress of gentrification.
A row of luxury homes in  the Sea Cliff neighborhood of San Francisco, California. (Photo: Justin  Sullivan/Getty Images)

A row of luxury homes in the Sea Cliff neighborhood of San Francisco, California. (Photo: Justin Sullivan/Getty Images)

I aim to re-define the pejorative use of the term "gentrification." To gentrify means to displace. I think to gentrify means to exclude. In this sense, gentrification remains a pejorative. "Gentrification" should be a pejorative.

If a place gets good enough, you won't be able to move there. California is so good, no one can move there. Some economists stay awake at night worrying about that problem, "What if the poor can't move to areas of high opportunity?" What if, indeed.

The young guns can't move to California because of Proposition 13. Why? Prop 13 provides incentives to stay in place, even when wages should push people out of place.

In 1992, the U.S. Supreme Court upheld Proposition 13, in part on the grounds that it furthered the policy goals of increasing "...local neighborhood preservation, continuity, and stability." In Property Tax Limitations and Mobility: The Lock-in Effect of California's Proposition 13 (NBER Working Paper No. 11108), authors Nada Wasi and Michelle J. White examine how Proposition 13 has affected the average tenure of owners and renters in California versus other states. They find that Proposition 13 definitely furthered continuity and stability, because it caused a substantial increase in the average tenure of California households relative to that of households in other states. From 1970 to 2000, the average tenure of California homeowners and renters increased by 1.04 and .79 years relative to that of homeowners and renters in the control states. These figures represent increases in average tenure of 10 percent and 19 percent, respectively.

Moving into a place where people won't leave is expensive. Moving into a place where wage doesn't determine whether or not you leave is especially daunting. To boil down the above paper into one sentence: "The large effect of Proposition 13 on renters' tenure is particularly striking and suggests that longer tenure by owner-occupiers forces younger households to delay their transition from renting to owning." That sounds predictive. It is predictive.

California is hell for home buyers:

Last, there are 10 metros where millennials might not want to buy a home (and might not even qualify for a mortgage) because unaffordable payments persist for much of the loan term. To no surprise, many pricey West Coast metros top the list. For example, millennials in Ventura County, Calif., San Diego and Los Angeles would have to wait approximately 9 and half years, 16 years 3 months, and 25 years 3 months, respectively, until income growth makes mortgage payments affordable. In pricey San Francisco and San Jose, Calif., unaffordable payments would persist for the life of the loan.

According to economists, Prop 13 makes it hard on renters to buy homes in California. Trulia steers Millennials clear of home buying in California. Nevada says thank you. Portland, Oregon, says back off.

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Jim Russell, a geographer studying the relationship between migration and economic development, writes regularly for Pacific Standard.

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