Emerging California-like Regions Across the Globe

Slowing Housing Market and Economic Challenges in the Pacific Northwest and Colorado

A series of economic challenges have been unfolding in the states of Colorado, Washington, and Oregon, with housing-construction rates slipping and the business climate deteriorating.

One of the key factors contributing to these issues is the regulation-heavy land-use policies in these states, which have been driving up housing costs, making life more expensive for residents. This, combined with increasingly radical politics, has led to rising crime, homelessness, and disorder in many cities.

Over the past two decades, these states had generated many new jobs, but today, all fall below the national job-creation average, with Colorado and California close to the bottom. The states' business start-up rate has also fallen, and business confidence is low.

The states' housing markets have been particularly affected. Portland's and Seattle's house price-to-income ratios are over six, while faster-growing cities like Houston, Dallas, Austin, and Raleigh have ratios between four and five. Colorado's cost-of-living ranking fell from 35th in 2022 to 46th in 2024.

The decline in these cities can also be traced to domestic out-migration. Since 2020, Seattle and Portland have lost nearly 100,000 and nearly 33,000 domestic migrants, respectively, while Denver has seen a net loss of 18,000 migrants. Oregon and Washington have also seen a decline in the number of domestic migrants.

Financial challenges are another concern for these states. Washington is looking at shortfalls that could reach $6 billion to $12 billion. Colorado and Oregon are facing similar financial challenges.

In terms of politics, the Democratic Party holds power in Colorado, with Democratic majority leadership in the Colorado Senate and legislative actions led by Democrats such as Robert Rodriguez. Colorado's Governor Jared Polis presides over a state with the nation's sixth-worst regulatory burden.

All three states have pledged to eliminate fossil fuels over the next two decades and are committed to California-style electric-vehicle mandates, aiming to get rid of gas-powered cars by 2035. However, these states now rank well behind rivals like Texas, Florida, and Arizona in business-climate rankings.

Washington has not elected a Republican governor this century, but the political landscape may be shifting as voters grapple with the economic challenges facing the state. It remains to be seen how these developments will play out in the coming years.