Why Toyota Moved to Texas

Bloomberg View , April 29, 2014

Toyota sent shock waves through Southern California when it announced that it’s moving its North American sales headquarters from Torrance, south of Los Angeles, to Plano, Texas, north of Dallas. The move, which is part of a broader headquarters consolidation, will cost the city of Torrance about $1.2 million in annual tax revenue and affects about 3,000 employees.

Employees who relocate are in for a surprise. Contrary to the image promulgated by both critics and boosters, Texas is not an alien planet populated by barbarians with big hair.

With its cheap suburban housing and good public schools, Plano in fact offers a 21st-century version of the middle-class California dream that built towns like Torrance. It’s just been updated, with more immigrants, better restaurants and a lot more marble countertops.

In contrasting Texas and California, politicians and pundits tend to emphasize taxes and business regulation. But for most people on a day-to-day basis, the biggest difference between the two is the cost of housing.

Although Plano is one of the country’s richest cities, with a highly educated population and a median income of $85,333 compared with Torrance’s $70,061, it offers a much wider range of housing options. You can pay almost $7 million for a five-acre estate in Plano -- $3 million more than the most expensive listing in Torrance -- but the average home costs less than $200,000, compared with $552,000 in Torrance. A Redfin search for three-bedroom houses costing less than $400,000 turns up 149 in Plano versus four in Torrance; lowering the threshold to $300,000 cuts the Plano supply to 73, while yielding nothing in Torrance.

As I’ve written elsewhere, Plano’s combination of inexpensive real estate and excellent public schools has cultural consequences. It allows for more traditional lifestyles, since many families don’t need a second income to live a comfortable middle-class life. Many mothers choose to stay at home or to work, often part-time, for personal fulfillment and luxuries such as family vacations. For both men and women, a life oriented around work rather than family is less common than in coastal enclaves of similarly highly educated people.

Simultaneously cosmopolitan and traditional, Plano will undoubtedly turn off some Toyota transplants. The conversational assumption that everyone belongs to a religious congregation of some kind -- if not Christian, then Jewish, Muslim, Hindu or Buddhist -- will create culture shock. But a lot of people will discover that they can have a lifestyle they thought was a vanished American dream. As long as that’s true, companies are going to keep moving to Texas.