Top 14 Reasons Why is California So Expensive to Live In

“The best things in life are free; the second best are expensive.” – Coco Chanel.

The Golden State is a lucky place to live with dreamy beaches, thriving pop culture and a land of good fortune and good opportunities. 

Why is California So Expensive to Live in

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However, all of these are not free and have a price to pay. For over a century, people chase to the West Coast state, resulting in unequal supply-demand, so it’s no wonder why is California so expensive to live in. Also, know what the Golden State is famous for!

Gain valuable insights into the challenges Californians face, and discover the underlying reasons behind the state’s reputation for a high cost of living. Let’s unravel this intriguing phenomenon together!

What Is It Like Living in California? 

Are you looking for a perfect destination with plenty of sunshine, easy access to the ocean, and high-quality fresh delicious foods? Then there is no place better than California beach towns. Moving to California will be the best option for you to enjoy these things. I always loved the easy-going culture, diverse food options, the golden sunny weather, and most importantly the golden opportunities. Northern California is the place for modern technology and innovation!

In comparison with population and land sizes, California holds the biggest share in the nation. The Golden State has more than 28 national parks and you would be awe-struck visiting Joshua tree, Sequoia, Ortega Falls, Escondido Falls, Yosemite, and many more. After getting the job, every month I used to explore the scenic hiking trails in southern California and I would suggest you hike to John Muir trail, Wallace Creek, Eaton Canyon trail, Half Dome at Yosemite National Park and many more.

On the other side, California’s sunny weather is the reason for the scariest wildfires. Since 2000, California has witnessed more than 8,000 wildfires. Apart from this problem, California is the most expensive place to live in. The median home value is about $539,800. 

So make sure you are prepared to spend lots of money on transportation and housing in California. Not only that, but you will also have to spend a lot of money on all the necessities for your daily life. One will equally be able to find out lots of pros and cons of living in California with time. 

Why Is California So Expensive To Live? 

The luxurious lifestyle and easy access to all the necessary things in California make the state attractive to the people to live in. However, there are so many reasons you will find ‘why is California so expensive to live in’. If you have already made up your mind to move to California then you should know about all the reasons that make the state very expensive. Let’s know the reasons why most cities are so costly in California.

Low Supply and High Demand

California is one of the most desirable states in America, so it is pretty obvious that it will be costly in comparison with other cities. To fulfill the overwhelming demands of people in California it does not have enough space to build new constructions. You will get some great places to live in Southern California but for the reason of the high cost, you will not be able to move in. 

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Sources say that California is providing 30% of the lower housing units which is the below percentage of demand in California. Most renowned companies like Apple, Google, and Facebook make their headquarters in California and everyone wants to move to California. They want to lead a secure life by having high-paying jobs. But the low supplement and high demand in California make the Golden State more expensive. 

High Labor Costs

High labor costs are a significant contributor to California’s expensive reputation. The state’s stringent labor regulations, including minimum wage laws and mandated benefits, increase expenses for businesses.

Additionally, the high demand for skilled workers, particularly in industries like technology and entertainment, drives up wages. California’s robust labor unions also play a role in negotiating higher compensation packages.

These factors, coupled with the state’s high cost of living, create a challenging environment for businesses to operate in and contribute to the overall high expenses experienced by residents and consumers in California.

Expenses and Taxes

The top growing cities in California become much more expensive than other cities. And daily, people have to spend a lot of money in comparison with people from other states in America. It is not too easy to afford to live in California. A large part of California is struggling with the extra expenses. On the other side, California is also considered one of the most expensive cities in America in terms of taxation. However, California’s progressive income tax structure results in high tax rates.

You might regret living in California after moving to the state if you are not having a high paid salary scale. It holds the highest income tax with 7.25% for sales. Those people who are fortunate in the bottom income bracket have to pay 1% of their income to Income Tax. 

Until 1995, California’s biggest revenue source was property taxes but now, its income taxes. You will be surprised to know that California earns a minimum of $325.7 billion from a combination of taxes and fees only from Washington.

High Average Salary

Its reputation for having high average earnings is one of the major factors raising California’s high cost of living. The state is home to booming businesses like technology, entertainment, and finance that draw top talent and command market-competitive pay scales.

Employers in California frequently offer greater compensation to attract and retain talent due to a strong employment market and a high demand for experienced workers. Despite the fact that the higher average pay may appear alluring, it also translates to greater expenditures for goods, services, and housing, eventually adding to the state of California’s high cost of living.

Car Insurance

California does not offer auto insurance coverage therefore; you should consider your own insurance needs for whatever risk comes your way. California is the seventh most expensive state in America and every year people in the United State of America have to spend nearly 1962$ for using vehicles and used vehicles to go to their residences. However, in certain areas of California, it is cheaper than in other areas. 

But overall, most of the areas of California are taking a high amount of car insurance from their citizens every year. Both in Southern California and Northern California, you can see the highest car insurance percentage equally. 

why is California so expensive_San Diego
San Diego

Healthcare Service

Besides that, one more reason for having high costs in California to live in is just because of the health care services. People are taking the facilities of all high-quality health services from the best doctors and hospitals. This is the main reason why is California so expensive to live in. Along with this, the rent and house prices are equally increasing day by day in California which makes the place more expensive to live in. 

Gas Price

Another reason why you will find California is an expensive state in America is just because of the gas.  Residents of California have to pay a lot of money just because the state is focusing on environmental protection, so it charges the highest money and fees on taxes and gas. Both in Bay Area and Silicon Valley, you can notice the gas price is high along with property tax. If you are having your vehicles and hiring vehicles to go to your house or office then it will be easier for you to understand the matter in detail. 

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The reason why is California so expensive to live in, is the high prices of groceries. The way the whole of California is leading its lifestyle, it is needless to say that it is an expensive state to live in America. Most of the time people have to spend more than double their money on groceries in comparison with other areas of the country. According to the sources, Oakland is the most expensive area where people have to spend extra money on grocery items. Subsequently, the people of California often used a lot of money on utilities and for a real estate property more than the demand.

Why Is Property Value High In California?

As a resident of California, I’ve witnessed firsthand the factors contributing to the high property values in the state. The robust California real estate market, driven by strong demand and limited supply, plays a significant role.

Additionally, living expenses in California, including high taxes and the cost of essential goods and services, elevate property values. This dynamic, combined with the allure of California’s desirable climate and vibrant lifestyle, creates an environment where property values remain consistently high.

Do you know, why is housing so expensive in California? These are the main reasons for increasing house renting prices or property values In California. 

Haven’t Built Enough Housing

Is California expensive to visit? If this is your question then we want to let you all know that California does not have enough space to create new buildings! The growing demands of the people make the place more expensive in comparison to housing and renting aspects. There is no free land available where new construction can start. The citizens of California have to pay more than the actual pay scale for housing. And every year the percentage reaches up to 15.9%. 

California lifestyle expenses

Demand to Live and Work

Most of the big and branded companies are making their headquarters in California and providing the best pay scale jobs to the best candidates around the whole world. To get the best facilities and to lead a high-quality lifestyle, people prefer to live in California. The demand for living in California and working in California makes the place more costly for the people. 

New Housing Process Approval Is Difficult

The process of making new houses in California and the approval from the authority becomes much more difficult to pass. It takes a lot of time to get approval from the authority to start making a new building a residence to live in. Hence, this is a reason why is California so expensive to live in.  

Incentives to Build New Housing

For all the new buildings, the residents of California have to pay a lot of incentives every year or every month. This is one more reason why the property value becomes much higher with time. As there is not enough space to make new buildings and to fulfill the overwhelming demand of the people, it takes a lot of incentives from their new citizens as well as from the old. Moreover, if you are looking for an accurate reason why is Los Angeles so expensive, and then this particular reason also goes with Los Angeles. 

Land, Labor and Raw Material Costs Are Higher

The demand for raw materials, labor, and land is equally high in California making the place costly. Each one of the lands takes more money from its actual price. The raw materials are very costly to purchase to make new buildings. Therefore, the property value and the cost of the properties increased day by day. Not only had that, but the price value of the electricity also increased with time because of the unaffordable land. Why is electricity so expensive in California? The reason is the inability to fulfill the demands of the citizens of California. 

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San Francisco
San Francisco

Why Is California Gas So Expensive?

There are mainly three reasons why is gas so expensive in California.  Let’s know all the three reasons in detail. 

  • California only provides 30% of the oil which it needs and it is a fuel Island that does not have pipelines. To bring oil California has to pay a lot of taxes every year.
  • On the other side, another reason why gas is so expensive in California is the high tax percentage. The state takes the highest amount of taxes from all the citizens from every individual thing.
  • And lastly, to reduce pollution California uses clear burning gasoline for more than 25 years than the rest of the country. However, driving cars and taking the services of transport equally makes the gas price higher with time. 

California vs Texas Cost of Living

The Massachusetts Institute of Technology compared the cost of living based on transportation, health, food, child care, housing and others.

California is more expensive than Texas. MIT states that in California an adult with one child’s wage is about $83,917 whereas in Texas it is around $59,652. The food expense in California is $3,792 whereas in Texas it is around $3,177. The food expense is quite similar in both the states but Texas’s transportation cost is comparatively higher than California. In Texas, people spend 9.9% more compared to California people. 

Related Post: Top 10 Inexpensive Places to Live in Texas with Cost of Living

Should I Move to California?

With a combination of ocean views, ample job opportunities and standard quality of living, California are one of the best places to live in the US. This place welcomes everyone; from beach condos, urban housing, and remote towns to growing small cities close to mountains, California has a variety of options. If you are committed to moving to California, the first thing to keep in your mind is that house prices, property tax, groceries, utilities, healthcare, and other costs are higher compared to the other states. 

Moving to California Checklist

  • Choose a place to call home, research considering the factors: cost of living, safety, lifestyle, profession, and cost of housing 
  • Set a budget, spend no more than ⅓ of your monthly income
  • Find a real estate agent and book or rent a home
  • Plan well in advance and move in 

Here we have jotted down 14 things that you should know before moving to the Golden State.

Final Words

I hope you have gotten an overview of “why is California so expensive to live in”. I would not give you false hope, California is expensive. But if you do your research properly about the housing market you will find one property. If you are looking for an affordable place in California, check out the list of the cheapest places in California to live in. Lastly, I would like you to sit quietly and decide, “Are you willing to make a compromise to move to the Golden State?”   

Read Next:

FAQs: Why is California So Expensive

1. Is California overpriced?

A: The cost of living in California is relatively high because the demand and supply are not equal. People demand to settle down in California but housing options in California are limited. 

2. When did California become so expensive?

A: Since the Golden Rush in the 1850s California has become so expensive. 

3. What is cheap in California?

A: Vegetables and fruits are comparatively cheaper in California. 

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  1. Andy Taylor says:

    I live in California, and I can really feel the pain. And nowadays it’s too hard to live in a safe place in California if you don’t have a fat bank balance.

  2. When people think of California, they think of the vacation spots. Nobody is thinking Lancaster or Ridgecrest. The cost of living is substantially above the mean in the US. The cost of housing is substantially above the mean in the US and the politics are quite liberal. The policies of the liberal majority (there is a supermajority of democrats in the state government here, so there is little consideration for moderate thinking and absolutely none for conservative thinking) continually add more cost while not achieving the goals their policies set out to achieve.

    If you’re not making $150k+, you’ll struggle. Most people come here when they’re young, as I did 33 years ago, when there was more moderate leadership and taxes. It’s not that way now. I’ve watched our best and brightest engineers come in full of gusto and live with peers so they can surf and enjoy the weather. Then I watch them grow up, meet a significant other and figure out the only way they can achieve their life goals of marrying, having a family and building wealth for a realistic retirement is to leave the state.

    Come to California, but know that if you’re not wealthy, you’re going to be living paycheck to paycheck. And that paycheck will continue to shrink as more taxes are withheld to pay for the homeless, public transportation (that people don’t use), bullet trains to nowhere, lawsuits that the cities, counties and state pays to citizens who are wronged by them, and mismanaging real estate transactions.

    I retire in a year. I’ll take my pension (like many former state government officials do), my 401k, my stock portfolio, and my other earnings and leave. I’ll keep a house here, just so I can take in $5k/month to supplement our travel around the world.

  3. Are You Kidding Me says:

    People in the bottom tax bracket are not “fortunate.” Anyone who really thinks so should take a subminimum wage job and see how being taxed 1% then compares to being a millionaire being taxed at 8%. If you don’t want to do that, that alone says a lot.

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