Jan 16, 2026
For the sixth consecutive year, California had the largest outmigration of any state in the country, according to the annual U-Haul Growth Index for 2025 (1).
Yet despite this exodus, the state’s population is actually growing. In the year ending July 1, 2025, the Golden State’s total population grew by 19,200 — the third consecutive year of positive growth, according to the California Department of Finance (2).
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“Despite the common myth of a continually declining population, California has only saw a short period of population loss in its 174 year history — during the peak of the COVID pandemic,” said Governor Gavin Newsom on his website (3).
This apparent contradiction — heavy outmigration along with modest population growth — captures the complexity of California’s demographic picture, reflecting the state’s unique economic advantages as well as its most persistent challenges.
California’s biggest challenge
The state’s struggle with outmigration stretches much further than just six years.
“For over 20 years, California has experienced negative net domestic migration, in which the number of people moving out of the state in a year exceeds the number moving in,” says the Department of Finance report.
However, much of this domestic migration has been offset by foreign arrivals. Net international migration to California during the year ending July 1, 2025 reached 126,000 people (2). For decades, the state’s ability to attract talented students, entrepreneurs, researchers and workers from around the world has been a key driver of its economic growth.
According to the Public Policy Institute of California, the state is home to 22% of the nation’s foreign-born population, and these individuals account for roughly one-in-three of California’s prime-working-age adults (4).
The state’s position as an international talent magnet is one of the reasons why California’s economy continues to thrive. But, unfortunately, the side-effect of this rapid growth is a soaring escalation in the cost of living.
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As of mid-2025, California was the third-most expensive U.S. state to live in, according to the Missouri Economic Research and Information Center (5). And the high cost of housing, food and basic essentials could be one of the factors driving many local residents to other states.
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The affordability crisis
California’s high cost of living, especially for housing, seems to be the key factor driving domestic outmigration.
Between January 2020 and September 2025, housing costs in California rose much faster than incomes. Monthly payments on mid-tier homes increased by 74%, while payments on bottom-tier homes jumped 78%.
Meanwhile, over the same period, average hourly wages grew just 25%. Renters faced a similar squeeze, with rents rising 42% — well ahead of wage growth, according to the Legislative Analyst’s Office (6).
This rapid escalation in housing costs is one of the main reasons for the 2025 exodus, according to the PPIC’s analysis (7). In fact, roughly 34% of Californians said they have considered moving to another state because of housing costs. Coupled with high food and energy costs, the state’s cost of living is its most persistent challenge.
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“The affordability issue in California is real,” Governor Newsom admitted in an interview with Ezra Klein in December, 2025 (8). “It's been the original sin going back decades and decades.”
To tackle the issue, Newsom has said the state must clear regulatory barriers, push local governments to build more housing, reduce construction costs and prevent large institutional investors from dominating the housing market.
What can Californians do?
Moving out of California may be the simplest answer, but that may not be an option for many families. If you live in California and you’re reluctant to leave the state, there are practical steps you can take to combat the affordability crisis.
Start by making sure you’re using California’s tax credits and subsidies, which many families qualify for but often overlook.
For instance, CalWORKS offers voucher-based childcare subsidies. The California Earned Income Tax Credit and Young Child Tax Credit can offers $1,189 – $3,756 in cash back for qualifying families. And the California Housing Finance Agency offers affordable funding options for homebuyers and builders to boost ownership across the state (11).
These steps may not be able to fix California’s cost problem for you, but together, they can make living in the state a little more financially manageable.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
U-Haul (1); State of California Department of Finance (2); Governor Gavin Newsom (3); Public Policy Institute of California (4, 7); Missouri Economic Research and Information Center (5); Legislative Analyst’s Office (6); The Ezra Klein Show (8); California Department of Social Services (9); California Franchise Tax Board (10); California Housing Finance Agency (11)
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
