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The Other California

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from the magazine

The Other California

After Covid-19, the Inland Empire offers a way forward for the Golden State. Winter 2021
Covid-19
California
Economy, finance, and budgets

California’s coastal urban centers, once the ultimate land of opportunity, suffer notorious traffic congestion, unaffordable housing, and a social chasm defined by a shrinking middle class, a small wealthy sector, and a sizable population seemingly locked in poverty. If there is a future for the region’s middle and upwardly mobile working class, it’s more likely to be found in the state’s large, generally more affordable, interior, known as the Inland Empire, or “the IE.” But for that to happen, the area’s promise needs to be better recognized—and supported—by policymakers.

Starting in the second half of the nineteenth century as a rural area with a few small cities built around affordable land and imported water—San Bernardino, Riverside, Ontario—the Inland Empire evolved as a place where, as the city of Chino’s motto puts it, “Everything Grows.” Over the years, the IE’s burgeoning farm economy attracted Mormons, Chinese, Japanese, Dutch, Basques, and Russians, and the area was also home to a large Latino workforce. By the end of the twentieth century, the IE was California’s growth hub. More than 300,000 people moved in from the state’s coast between 2007 and 2011, representing America’s largest county-to-county population shift. The IE is now one of the nation’s fastest-growing economies, and Riverside–San Bernardino–Ontario, with 4.5 million residents, is America’s 13th-largest metropolitan statistical area, ahead of Seattle, San Diego, and Denver.

As California’s overall rate of growth falls below the national average for the first time, with Los Angeles itself losing population, the IE continues to attract migrants, particularly families. It has remained, according to the American Community Survey, the only large region in the state that exceeds the national average of residents between the ages of 15 and 50 with children. Most of the area’s growth comes from the increased influx of immigrants and minorities, heavily Latino. The IE turned majority Latino in 2017, according to census data.

The Inland Empire also seems well positioned to benefit from the effects of the Covid-19 pandemic. The American Enterprise Institute has found that, since the pandemic began, less dense areas, like the IE, are growing much faster than denser ones. In 2020 so far, for instance, new home sales are up 13 percent in the IE, compared with the same period in 2019, but are down 16 percent in Los Angeles and Orange Counties. Though the IE’s larger existing home market has taken a hit, its decline is 50 percent less than that experienced in Los Angeles and Orange Counties.

The employment picture is robust, too. Over the past decade, the IE grew its jobs by 25 percent, equaling the Bay Area’s pace and almost doubling that of Los Angeles and Orange Counties. Last year, the IE created more jobs than any major metropolitan area in the state.

The Inland Empire’s trajectory, however, is not problem-free, by any means. While jobs are plentiful, high-wage employment has been scarce. Overall income growth has been among the lowest in the country, and wages rank among the lowest of any of the nation’s 50 largest counties. Even as educated professionals have moved to the area, business-service growth has remained tepid, well below that of the Bay Area and, perhaps more important, of key competitor regions such as Las Vegas, Phoenix, Dallas–Fort Worth, and Salt Lake City. Some 350,000 of the IE’s skilled and non-skilled workers commute daily to the coast for work. According to its 2018 “State of Work in the Inland Empire” report, the Center for Social Innovation at the University of California found that residents of Riverside tend to go to high-priced Orange County, while San Bernardino residents head to Los Angeles. As a result, two IE communities, Corona and Moreno Valley, rank in the top ten nationally for average length of commuting time.

Map by Dolly Holmes

You can see what’s booming by getting on the freeways, dotted with giant warehouses for firms like Amazon, Costco, and Walmart. Sadly, IE warehouse workers, notes a recent study, make just $22,000 annually on average, and most live in crowded, substandard housing. For every $1 in wages paid by Amazon, warehouse workers receive an estimated 24 cents in public-assistance benefits. There’s a clear “mismatch,” note University of California–Riverside researchers, between the housing and job markets, with not enough jobs paying a sufficient amount to cover local rents and mortgages.

Under current circumstances, this situation will not improve. The Brookings Institution projects that most of the area’s new jobs over the next ten years will not pay enough to maintain, much less boost, living standards. For an Inland Empire family of four with two working adults, each parent must earn about $18 an hour, or $36,000 annually, to make ends meet. Only 38 percent of jobs in the IE meet this standard. Brookings concludes: “Although the Inland Empire has seen exceptional growth for years thanks to its affordability and proximity to the Pacific Coast, it has hardly grown more prosperous.”

To make matters worse, California’s regulatory, tax, and energy policies work directly against those industries—agriculture, manufacturing, oil and gas, and logistics—that tend to concentrate in the interior. Energy costs in California, driven by environmental mandates, are some of the nation’s highest. Since 2011, electricity prices have increased at five times the national average. In 2017 alone, they rose at three times the national rate. These restrictions impede industrial firms from expanding, observes California Steel’s executive vice president Brett Guge. The last big steel mill in California, he notes, “pays about twice as much per kilowatt hour as any other steel company of our type in the industry . . . and that is millions of dollars a year, in our case. Every year, we are in the hole in energy, and it’s a growing cost.”

“Over the past decade, the Inland Empire grew its jobs by 25 percent, equaling the Bay Area’s pace.”

These policies are particularly devastating for areas like the Inland Empire, where the percentage of the population with college degrees is well below state averages. These are the workers hurt most by the shift of new industrial projects not just to Texas but also to smaller Ohio, Georgia, and North Carolina. The state also lags in gaining “reshoring” projects that return to the U.S. from overseas.

Companies that once headed to the IE, notes Steve PonTell, CEO of National Core, an affordable-housing developer and prominent IE business leader, often now choose Arizona and Nevada. During 2018 and 2019, for example, manufacturing employment—once the backbone of the IE economy—grew at half or less the rate of Houston, Austin, or Phoenix. The state, notes economist John Husing, seems unconcerned about such unfashionable jobs outside the coast. “To a large extent,” the Inland Empire expert suggests, “the state is saying to hell with the rest of us.”

If meeting the aspirations of the middle and working classes truly mattered to California’s ruling class, state officials would encourage the Inland Empire’s development. In the past, California policy permitted lots of housing construction in areas with lower land costs. These policies managed to meet demand by creating new communities in what was then considered the hinterland, such as Lakewood, Irvine, Valencia, and Foster City. But in recent decades, state planners have increasingly sought to reinforce an urban model dominated by a dense central core and mass transit—essentially rejecting the polycentric urban form that today characterizes the vast majority of American cities. (Even in San Francisco and Los Angeles, with by far California’s strongest central business districts, approximately 70 percent of employment is dispersed outside inner urban areas.)

One way that the state has pushed this goal is through new regulations seeking to reduce vehicle miles traveled (VMT). The VMT regulations reward infill projects and steer growth into areas “near transit,” especially “transit priority areas,” as defined by the state senate—in other words, away from the less dense regions such as the Inland Empire. On a statewide basis, this policy seems wrongheaded, given that 79 percent of Californians drive to work by themselves. With the notable exception of downtown San Francisco, California’s dispersed job locations make traditional mass transit a supplemental choice, at most. Yet state policy remains stubbornly dogmatic, which suggests that new business and housing developments will be allowed only in areas with transit, however minimally used.

Even before Covid, mass-transit usage was not expanding. The share of Angelenos commuting by transit had dropped 15 percent since 1990, while the share of workers who telecommuted more than doubled. In 2019, the Los Angeles Metro System carried approximately 120 million fewer riders in 2019 than in 1985, despite the opening of a huge rail system, with six lines radiating from downtown. In the Inland Empire, transit commutes account for an even smaller percentage and make even less sense to residents. In Los Angeles, the average commuter can reach 33 times as many jobs by car as by transit. In Riverside–San Bernardino, Southern California’s fastest-growing region—even with its high-quality Metrolink commuter rail service—the average worker can access nearly 100 times as many jobs in 30 minutes by car as by transit.

Under the VMT restrictions, notes Rick Bishop, executive director of the Western Riverside Council of Governments, it will be “very difficult” for new housing to be built, even in the most environmentally sensitive planned development. Given approval delays, local fees, and ever-changing green mandates, few projects pencil out. In Bishop’s area, home to some of the most affluent parts of the Inland Empire, there are some 200,000 permitted lots but barely 5,000 houses under development. Overall, developer Alex Espinoza notes, fees can drive up the cost of an 1,800-square-foot “starter house” by at least $50,000, putting it out of reach for many prospective buyers. Fees and regulations aimed to discourage suburban development also raise the price of housing—approaching $400,000—which, though cheap by coastal standards, remains largely unaffordable, with a median house-to-income ratio of over five, for most families. By contrast, in competitive regions like Dallas–Fort Worth, the ratio is closer to three.

These policies make little sense, both environmentally and for the state’s middle class. Fighting climate change by limiting the supply of housing to already-expensive areas seems an inefficient and regressive way to cut emissions. The call for more density is unlikely to get people out of their cars, given California’s spatial configuration.

Much of the problem, suggests Ron Loveridge, a former county supervisor and former mayor of Riverside, lies in California’s one-party political system, largely dominated by the Bay Area’s urban and green progressives, as well as the public-employee unions. As one recent study demonstrates, the San Francisco metropolitan area, with 12 percent of the state population, has dominated housing policy, while representatives from places like the Inland Empire, the Central Valley, and Orange County have been notably ineffective in getting legislation passed. “We were left behind politically for so many years,” says former Eastvale city manager Michele Nissen, now chief of staff to Riverside County Supervisor Karen Spiegel. “Northern California gets what it wants and needs, and the Inland Empire is seen as, ‘Oh, you are cute, now go sit over there and be quiet.’ ”

The region’s farm economy has long been a magnet for immigrants; the Inland Empire became majority Latino in 2017. (BUYENLARGE/GETTY IMAGES)

Rather than trying to re-create San Francisco on a statewide basis, it would make more sense to allow development in those inland areas where working- and middle-class households are more likely to be able to afford to rent or buy homes. Encouraging the growth and success of the Inland Empire represents the most compelling way to resuscitate Southern California. The state’s current approach, wherein highly unaffordable coastal areas get most of the high-end jobs, forcing huge numbers of commuters onto the freeways, is not sustainable economically, socially, or environmentally. The state should seek to promote more job growth in areas where people can afford to live.

This would also allow the area, and the state, to take fuller advantage of the area’s increasing population of high school graduates and college-educated residents. To do that, the region needs relief from regulatory overreach and a coherent economic policy. The growth of online work represents an opening—professional and business services already have been growing much faster than in the coastal counties, as young professionals look for homes or affordable rentals. Shifts in technology, accelerated by Covid-19, could provide another boost. Several states and localities, including Iowa, Maine, Oklahoma, and Vermont, have taken steps to allow people to turn their residences into offices—promoting less commuting and saving considerable energy resources. Yet California, despite its self-appointed green leadership, has made virtually no efforts to support such environmentally friendly employment policies.

Inland Empire residents and their leaders will have to do it themselves. Despite its vast size, however, the area remains weak politically. “Who is the quarterback in this region?” asks Clemente Mojica, executive director of Neighborhood Partnership Housing Services. “Who is marketing this place? We don’t even have our own media. All you get is channel 5, etc. It is all LA, and we get news that only bad things happen in the IE.” The Inland Empire also needs to improve its appeal locally. It needs to add more urban amenities to attract knowledge workers—as Riverside is doing in its historic downtown.

Over the long term, however, the key to area prosperity lies in attracting families with children—the very groups now fleeing the coast. “My recommendation for the region,” suggests National Core’s PonTell, is to “let us lead with kids; make them our focus, our priority . . . provide them with a place where there is a sense of community and they feel they belong.” This emphasis is already evident in the numerous highly rated school systems in the area, such as Murrieta Valley Unified in Riverside and the Etiwanda School District. But poor performers remain, too, like San Bernardino Unified and Moreno Valley Unified in Riverside County. If Riverside, Ontario, and new cities like Eastvale offer a hopeful vision of strong economic growth, the impoverished, dysfunctional areas around downtown San Bernardino still serve as reminders of the grim predictions made a decade ago about the region’s future.

Ultimately, the Inland Empire’s fate matters not just to its residents but to Southern California as a whole. It is here that the Southland can most readily build an economy that provides opportunity for middle- and working-class residents. The alternative is to follow a path that resembles that of the Paris banlieues, with a largely minority, impoverished periphery serving as a dormitory for low-end service workers. Rather than accepting suburban poverty or treating the region as a problem to be corrected, state policymakers should embrace the Inland Empire as the best place to recover the fading California dream.

Top Photo: Housing remains relatively affordable, by California standards, in the Inland Empire, though misguided policies are driving up construction costs. (DAMIAN DOVARGANES/AP PHOTO)

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