Shrinking city: Economic vital signs point to exodus
Huge drops in sales tax revenue, rent indicate people are leaving
Plunging BART and Muni ridership. The weakest online sales tax collections in the state. A 20% drop in apartment rents. Spiking office vacancies.
San Francisco’s bleak economic vital signs over the past six months strongly suggest residents are leaving amid record job losses, the entrenchment of remote work, and a coronavirus pandemic that shows no signs of ending.
It’s still unclear how many people have left, but moving vans and Medium posts tell the story of an ongoing migration. Weakness in the rental market and virtually flat online spending during shelter in place show that residents aren’t just staying home, they’re leaving, experts say. The city’s ability to attract new residents or lure old ones to return will be critical to avoid punching a giant hole in a local budget that has swelled to almost $ 14 billion.
In an increasingly virtual economy where daily goods are delivered not for convenience but out of pandemicdriven necessity, all you have to do is count the
Amazon boxes.
Between April and June, the nine counties across the Bay Area saw big drops in brickandmortar sales taxes as orders to stay home took effect, ranging from a 17% drop in Santa Clara County to a 53% drop in San Francisco, compared to the prior year. But eight of the counties — everywhere but San Francisco — saw major jumps in online sales taxes, as high as 36% for Contra Costa County.
San Francisco saw only a 1% increase in the tax collected on online sales. That figure was by far the worst not only in the region, but among California’s 20 largest counties. Los Angeles County saw a 31% increase in online sales taxes, San Diego County saw a 38% jump and Sacramento County saw a 32% spike.
“That’s a sign to me that people aren’t here,” said Ted Egan, San Francisco’s chief economist.
The empty streets are reminiscent of the aftermath of the dotcom bust of the early 2000s, said Noni Richen, president of the Small Property Owners of San Francisco, an advocacy group.
Her members have former tenants who have left the city because, after losing their jobs or having classes shifted to online, they saw no reason to stay.
“There is a decline in occupancy,” Richen said. “They’re moving home to mom and dad or somewhere cheaper.”
Real estate data firm Zumper reported a 20% annual decline in San Francisco’s median onebedroom rents this month, the largest drop among major cities. Inventory of forsale homes and condos reached a 15year high amid a flood of new listings, though prices for singlefamily homes are still rising, according to brokerage Compass.
One difference compared to the dotcom days is that tech titans like Google and Facebook, which have major offices in both San Francisco and Silicon Valley, have not cut jobs. Richen said she was encouraged that the companies have not scaled back, though they are allowing workers to stay remote until next summer.
“I think San Francisco will recover,” Richen said. “I think they will bounce back.”
Between February and August, the labor force in the San FranciscoRedwood CitySouth San Francisco metro area was down 4.5%, higher than the 4.1% drop for the state and 2.3% drop nationally. It’s consistent with evidence that urban areas have been hit harder than the rest of the country and could reflect people moving out of San Francisco, according to the Federal Reserve Bank of San Francisco.
Chris Thornberg, founding partner of research firm Beacon Economics, said talk of San Francisco’s doom and decline is overblown.
“As soon as the virus is under control, the economy is going to bounce back like nobody’s business,” he said, predicting a recovery in San Francisco by next spring. “I don’t think you need a vaccine.”
He said that excessive restrictions on business reopenings were unnecessary and ineffective. “I don’t think there’s any way to stamp this disease out by shutting down the economy,” he said.
But San Francisco officials remain cautious. There is still no timetable for when nonessential office workers can return. More tech companies — who now dominate the ranks of San Francisco’s largest private employers — are embracing remote work, for longer time periods or in some cases indefinitely.
“That opens up a huge question: When are they going to come back? Are they going to come back?” Egan said.