In my previous post, I proposed building a large new city at Camp Pendleton (between Orange and San Diego counties.)

One commenter suggested that this was not a good location:

I don’t know.  The new city would still be in California, with all the excessive state regulations.  And I expect it would be just as expensive to live there as all the other coastal California cities.

I share with many conservatives and libertarians the view that California is a rather poorly governed state, which is adversely affected by a wide range of counterproductive progressive policies.  But I interpret that claim in a very different way from many other people on the right.  And I plan to show that I’m right and they are wrong.   

Here are two categories of bad California regulations:

1.  Progressive policies such as rent controls, school closures, excessive state spending, picky business regulations, poor control of crime in places like San Francisco, etc.

2.  A wide range of zoning and permitting rules that make it exceedingly difficult to build housing (both dense urban housing and suburban housing in greenfield developments.)

The first category includes a large number of bad policies, but the second category may be far more important, at least in aggregate.  How do I know this?  Consider the impact of each policy category on California housing prices.  The first group of regulations makes California a less desirable place to live, and hence depresses housing prices.  In contrast, the regulations that constrain new construction tend to reduce supply and thus boost California housing prices.  The market (high house prices) is telling us that the second issue is more important and that California is an excellent place to build a new city, despite all of the regulatory problems.  Indeed to some extent, it is a good place to build a new city because of the severe regulatory constraints in category #2.  

When we bought a home in Orange County back in 2016, its value was about the same as the Boston area home where we were living.  Today (according to Zillow), our Orange County home is worth far more than the Massachusetts home that we vacated.  Its value has increased by 80%, vs. 40% in Massachusetts. So why are homes in California worth so much, and still rising rapidly in value, if the state is a dystopian hell that everyone’s fleeing for Texas and Florida?

The answer is simple; California is still a very appealing place to live for many people.  And those “many people” are often individuals with fairly high incomes. 

As a reader of the news media, I’m aware of many of the problems with governance in California.  But in terms of my day-to-day life, governance problems don’t affect me very much at all:

1.  The roads here in OC are much better than back in Boston.

2.  The University of California (which my daughter attended) is far better than the University of Massachusetts.

3.  I don’t have to go through the annoying vehicle inspection process each year, as I did back in Boston.

To be sure, some things are worse.  The home insurance industry is over-regulated, resulting in far higher premiums than in Boston.  I suspect the health insurance industry is also poorly regulated, but I’m not an expert in that area.  Small business owners face lots of intrusive regulations, as do landlords.  Taxes are higher. San Francisco has lots of petty crime.  Covid regulations were often quite foolish (but did not impact my life at all.)  

Nonetheless, I think conservatives are making a mistake when they suggest that Californians are fleeing a dystopian nightmare.  The very high price of homes in this state suggests that the overall quality of life here is the highest in America.  You may know someone who sold their California home and moved away because they hated California, but someone else bought that home for a very high price.  Instead, the lesson conservatives should draw from California is that America’s biggest problem is foolish barriers to homebuilding that prevent millions of people from moving to places with exceedingly high living standards.  You might wish to believe that California is a dystopian nightmare, but the housing prices suggest exactly the opposite.   The biggest problem with California is that far too few people live here.

In January, I drove around both coasts of Florida.  More recently, I visited the SF Bay Area and then drove back down to Orange County, stopping at various places along the way. The SF Bay Area, Monterey, Santa Barbara, Ventura County, West LA, Orange County, and San Diego are some of the best places to live in the entire world.  The Inland Empire is less attractive, but still no worse than much of Arizona or Nevada.  Florida is far less attractive than coastal California.

This does not mean that California has a better state government than Florida.  In terms of economic regulations, Florida is much better managed.  I attribute the success of California to two factors.  First, it has a great climate and beautiful scenery.  That attracts people.  (Florida has a good climate but ugly scenery.)  Second, it attracted important 21st century industries before the state was taken over by progressives.  Through a combination of good natural amenities and the benefits of agglomeration, they’ve been able to hold onto those creative industries despite a deteriorating regulatory environment.  High skilled people also tend to be socially liberal, and California is very socially liberal.  Indeed it’s considerably more libertarian on social issues than even places like Massachusetts (which still has a puritan streak).

When my commenter suggested that the new city would be just as expensive as other coastal cities, he was right.  (Although it would slightly reduce prices throughout the region.)  But he misunderstood the implication of that fact.  If 500,000 Americans want to build million dollar homes in my new city of Pendleton, that means the new city would have great value to America.

PS.  Let me anticipate some comments.  You will tell me this or that bad thing about California.  I will agree, but argue that the high housing prices show the good outweighs the bad.

PPS.  I don’t like the name Pendleton for my proposed new city.  How about Utopia, CA?  Or “Irvine 2.0”, after the company that built the city with arguably the world’s highest living standard for cities with more than 250,000 people?  Or (given the current drought) Greenland?  🙂

PPS.  Florida has a nice climate, but California is sublime: