San Diego Business Journal

Once a beacon for many transplants from other states seeking a new life, San Diego has been undergoing a dramatic shift in its population as more folks decide to relocate to greener pastures.

Over the past decade, the region has lost more than 130,000 residents who have moved away mainly for economic reasons, according to a recent report from the National University System Institute for Policy Research, a think tank affiliated with the university.

The exodus is part of a much larger phenomenon that has been occurring throughout California, but particularly from Southern California during the past two decades, said Kelly Cunningham, the economist who wrote the report.

“This out-migration really began here about 2003 as the prices on housing got too high for many people, and has continued over the years and increased as the economy worsened,” Cunningham said.

Citing data from the state’s Department of Finance, the report shows San Diego’s population as of July 2012 at 3.1 million, which will rise to about 3.2 million this year.

Births and Influx From Abroad

However, the gain is the result of more natural births than deaths, combined with an influx of people from other countries. Had local residents stayed put, the population would be much greater, Cunningham said.

Ironically, it was in 2005, a year of relative economic prosperity and low unemployment, that San Diego saw the largest number of residents move out, or about 27,000. The biggest reason for many relocating was the growing unaffordability of housing, Cunningham said.

When the housing bubble burst beginning in 2006 and leading to a full-fledged recession in 2007, more county residents decided to leave San Diego because of their employment situation or lack thereof, he said.

“Before, housing prices were the primary driver, but since the recession, it’s caused by the lack of jobs,” Cunningham said. “Our economy is now in recovery but it’s not as much of a recovery that’s been happening in other places outside California.”

While he didn’t have data on the income levels of those moving out of San Diego, Cunningham estimated that it’s mostly folks who have lost their jobs in the hardest hit industries, including construction, office-related jobs, and retail.

Middle-Income Exodus

“Most of the people moving away are the ones in the middle-income wage category, also a good number of business owners,” he said.

These folks generally had greater spending power, and because they’re not here, the region is losing that spending, which generates additional job growth, Cunningham said.

On a statewide basis, the flight by many from the Golden State began in earnest in 1990, according to a study by the Manhattan Institute for Policy Research, a New York-based think tank.

The study released last year stated that since 1990, California has lost nearly 3.4 million residents who migrated to other states, or about 80 percent of what it had gained from domestic migration in the previous 30 years.

The authors, Tom Gray and Robert Scardamalia, said the migration is being caused by several factors, including chronic economic adversity and increased population density (the study notes the Los Angeles/ Orange County region has a density of nearly 7,000 residents per square mile, which is greater than New York or Chicago.)

A third factor is the constant fiscal instability of the state and local governments. That situation sends the message to residents and businesses that they can’t count on the government to provide essential services, much less tax breaks or incentives, according to the think tank’s report. Another message sent is that chronically out of balance budgets can be seen as tax hikes waiting to happen, the report said.

“The data suggest that many cost drivers — taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs — are prompting businesses to locate outside California, thus helping to drive the exodus,” the report states.

In his report on San Diego’s regional economy, Cunningham estimates its gross regional product, the sum of all goods and services, in 2012 came to $185.5 billion. He forecast GRP this year to be $193 billion, for an inflation adjusted increase of 1.5 percent. That’s down from a 1.7 percent rise in 2012.

The 2013 GRP forecast for the local economy will slightly lag that of California’s estimated 1.6 percent growth and that of the nation at 2 percent, said the NUSIPR report.

The factors that are driving people and businesses out of the state, mainly increased taxes and regulations, continue to impede a stronger recovery, Cunningham said. Increasing these elements to plug budget gaps will only cause more businesses and residents to move, thus keeping the cycle going in a downward direction, he said.