Why you should care
As people exit the Golden State in growing numbers, the Grand Canyon State is becoming an attractive alternative.
Morgan Tucker grew up shuttling between Arizona and California owing to the demands of her father’s job in the apparel industry. Just before Tucker’s 16th birthday, her father was diagnosed with a brain tumor, and the family became a single-income household facing high health care costs. After that, they certainly weren’t returning to California — Arizona’s lower cost of living made it easier for Tucker’s parents to navigate their financial challenges.
Tucker, now 36, has primarily stayed in Arizona ever since and is rooted in Phoenix. She made a choice years ago that is becoming increasingly popular. A growing tide of people is bidding farewell to the California coast and choosing the Grand Canyon State instead.
More than two-thirds of all domestic population movement in Arizona in 2017 was inbound, the highest among all American states, according to a study by North American Moving Services (NAMS) based on census data. That fraction of incoming-to-outgoing populations has steadily risen within Arizona, which ranked fourth among U.S. states in 2012. Including immigrants, Arizona’s total population growth rate of 3.15 percent between 2015 and 2017 was second only to Florida’s 3.53 percent among states with a population greater than 5 million people, according to raw census data. Within Arizona, 80 percent of net migration went to the Phoenix metro area, says Sandra Watson, president and CEO of the Arizona Commerce Authority.
By contrast, the NAMS study found that 60 percent of California’s domestic moving population was leaving the state in 2017. And even including new immigrants, California’s net population grew by only 1.29 percent — less than half Arizona’s rate of growth — between 2015 and 2017, according to census data.
You go from coach to business class.
Joel Kotkin, demographer, on moving from California to Arizona
Driving this shift in Americans’ state preferences is a cocktail of strict regulations on businesses and the dual blows of climbing real estate prices and a high income tax for individuals, according to Joel Kotkin, presidential fellow in urban futures at Chapman University. “California has two narcotic addictions: One is Silicon Valley, and the other is high-end real estate,” Kotkin says. On the other hand, Arizona’s low tax rates and looser regulatory environment position the state as an attractive alternative. Phoenix became the second-fastest-growing American city in 2017. The business and financial services sector grew 26 percent from 2012 to 2017 in the Phoenix-Mesa-Scottsdale Metropolitan Statistical Area, and the bioscience and health care sector grew 17 percent, according to the Arizona Commerce Authority. Kotkin says young families with relatively high incomes moving from California to Arizona get an upgrade in affordability and housing quality.
“You go from coach to business class,” he says.
Things weren’t always this way. Back in the 1980s, California’s population was soaring by 2 percent each year. Arizona, on the other hand, saw its population grow by a total of 3 percent over that entire decade. As late as 2012, NAMS studies show, at least as many people moved to California as the number that left. But the state’s birth rate has shrunk dramatically — in 2017, it was half that of 1990. The rate of growth of California’s foreign immigrant population has also declined sharply, from 37 percent in the 1990s to 11 percent over the past decade, according to a 2017 study by the Public Policy Institute of California.
While this has led to a slowdown in California’s population growth, other problems are pushing people to actively leave the state. Kotkin identifies two key groups quitting California: baby boomers approaching retirement and middle-income families aged 35-44. Aging boomers can sell their one asset — their house — and either afford a larger, nicer home in Arizona or a modest one and pocket the difference. California’s state income tax of 9.3 percent for the median income is also a deterrent for young workers and families; Arizona’s rate of 4.24 percent is less than half that. California’s median home value of $544,900 far exceeds the national median of $220,100, according to real estate website Zillow. And this strain shows. In 2016, more than two in five California households were “cost-burdened,” meaning they spent more than 30 percent of their income on rent, according to a Budget Center analysis of U.S. Census Bureau data.
These factors make it harder for California employers to build a sustainable tier of middle management by retaining workers in their 30s, when they may not want to live with three other roommates just to get by. Arizona, on the other hand, has a median home value of $246,800, less than half of California’s figure. For businesses, the state has other attractions, among them one of the lowest corporate tax rates in the country (4.9 percent). Watson also highlights Arizona’s relatively low lease rates, at $30.12 per square foot for Class A in the Phoenix metro area, compared to $74.01 in New York and $62.11 in San Francisco. “The dollar goes much further in Arizona than in California … from gas to real estate to a gallon of milk,” says Watson.
But not everyone in Arizona is happy with the influx. Neither the Arizona Commerce Authority nor the Arizona Farm Bureau keeps a formal count, but many California agricultural businesses are shifting to Arizona to beat droughts, high electricity costs — 60 percent more in California than the rest of America, according to Environmental Progress, a research and policy organization — and strict regulations. California is a “totally different animal” in terms of taxes and regulations, says Chelsea McGuire, director of government relations for the Arizona Farm Bureau, adding that these regulations are difficult to navigate. Many farmers grow crops on both sides of the border and talk about the difference in required permits. However, while California has dealt with groundwater pumping issues and a lack of water in the Central Valley, Arizona is struggling with its own water shortage. As people keep pumping from the finite supply of groundwater, water levels decrease and costs rise, says Kathleen Ferris, a former director of the Arizona Department of Water Resources.
Here’s how the unintended consequences may play out. The influx of people into Arizona leads to the shrinking of farmland. Because California migrants have more disposable income to spend on houses, demand for land and housing rises, McGuire says. As a result, pressure mounts on farmers to sell their land to real estate developers. Although they’ll probably earn a larger profit selling than if they continued to grow crops, there’s an overall decline in acreage farmed. Then there are concerns about whether the state’s infrastructure and public school systems can adequately support a more populated state, McGuire says. Arizona already has among the lowest K-12 public school spending per student in the nation (ranking 49th overall), according to 2016 Census Bureau data.
Still, those who have moved to Arizona aren’t regretting it. Tucker loves her comfortable three-bedroom house, just minutes from downtown Phoenix. She recently got engaged and breathes easier knowing she can afford to take a vacation when she wants to — a stark contrast to the financial pressure she felt in Los Angeles. She spent her childhood in flux, but now? She’s not going anywhere.