Take The Money And Run: Why L.A.'s Middle Class Is Leaving

Why is L.A.'s middle class leaving?

Joel Kotkin asserts today, in an essay in the L.A. Times, that "Working and middle-class families are moving out — and failing to move in — because they cannot afford a house here."

He does not, however, cite any kind of survey of people who have fled the city about their reasons for doing so. Rather, he notes merely that: i) middle class people cannot afford to buy homes here; and ii) middle class people are leaving. Therefore, he concludes, the former caused the latter: middle class people are leaving L.A. because they cannot afford to buy a home here.

This "reasoning" is what we in the logic trade call a "cum hoc ergo propter hoc" fallacy. Simply stated: just because two things happen at the same time doesn't mean one caused the other. Just because L.A.'s middle class cannot afford to buy a house here does not mean that's why they're leaving.

Consider another explanation for the massive flight of American citizens from L.A. and California, from a person with one foot out the door:

As a result of hundreds of thousands of illegal aliens having swarmed into Los Angeles -- maybe 1 million? -- it is no longer a nice place to live. On the contrary, increased population density, perpetually gridlocked traffic, abysmal schools, hundreds of murders annually, and a third-world ambience have transformed L.A. into a terrible place to live.

Nor is there any hope of improvement, because entrenched career politicians at the local, state and national level will clearly do nothing to stop the problem. Increased population density and decreased interest rates, moreover, have driven the price of real estate sky-high.

So if you're an American citizen who's owned real esate in L.A. for over six years, you have two choices: stay here and watch the city deteriorate even more, or "cash out" for a premium and move somewhere nice.

Think about it. If you bought a home for $500,000 in 2000 by, say, putting $100,000 down, and borrowing $400,000, you can make a small fortune by selling now that your house is worth $1 million. Indeed, by selling, you wouldn't just double your money, you would make a five-fold profit (i.e., your original $100,000 plus the $500,000 you net after paying off your $400,000 loan).

After you sell your property, you can't make any money by buying another home to live in here -- all prices having risen -- so you either stay and rent, or escape the unbearable city once and for all by moving away. That's what people are doing: voting with their feet. In other words, "TAKE THE MONEY AND RUN!"

Plus, if you have children, you'll probably save another $20,000 annually per child because you'll be able to send them to public schools wherever you move. Here in L.A., by contrast, parents who can afford private school tuition pay it to spare their children the nightmare known as "LAUSD."

State statistics show that hundreds of thousands of American citizens have been fleeing California each year for several years. Businesses, too, open factories not in California, but in states that welcome them.

So before any of you fall for the same "cum hoc ergo propter hoc" fallacy that Mr. Kotkin did, think about whether there is an alternative explanation.

When I, for one, flee this city, it won't be because I can't afford to live here, it will be because I can't stand to live here.