(NewsNation) — San Francisco ranked dead last in a nationwide study examining why some American cities are dying and others are bouncing back. It’s the only metro in the nation where rents are still lower than in April 2020.
The rents are 2% below what they were before the pandemic, according to Apartment List’s June national rent report. Condominiums in San Francisco’s downtown market are also still selling at reduced prices. It signifies the area’s struggle to recover from the pandemic and poses the question: will the city by the Bay ever return to what it used to be?
Apartment List predicts it’s unlikely there will be a strong rebound in San Francisco anytime soon. They attribute the city’s sluggish rental demand to the recent turmoil and crime in the Bay Area. The collapse of California-based Silicon Valley Bank sent shockwaves through financial communities both in the U.S. and globally.
“Especially in 2021, and early 2022, rents were rising at double-digits nationally and even faster in places like Phoenix and Vegas, places that aren’t too far away but have just been on a completely different growth trajectory,” Apartment List Chief Economist Igor Pavpov told NewsNation Digital. “A lot of people are looking at San Francisco and wondering, well, what’s going on there in that pocket of the country?”
Papov broke it down into four key trends as to what may be happening.
Tech layoffs impacted the rental market
More than 800 tech companies laid off a total of 200,000 people in 2023, according to Layoffs.fyi. In 2022, more than 100,000 tech companies laid off nearly 165,000 people.
San Francisco Mayor London Breed went on record in 2022 saying the state needs to rely less on Silicon Valley and the tech companies that have made it thrive. “Life as we knew it before the pandemic is not going to go back,” Breed said in an interview with Bloomberg News.
“San Francisco thrives on innovation that promises investors payoffs far into the future. And those are exactly the kinds of industries that pull back when interest rates rise,” Papov said. “Some of the big tech employers started to have hiring freezes and then layoffs, which I think affected the San Francisco rental market even more.”
San Francisco’s response to COVID-19
California was the first state in America to put in place a coronavirus lockdown, and San Francisco, in particular, was one of the more cautious cities with respect to its public health response.
“The effects of the pandemic lasted longer in San Francisco than they did many other places. And that, I think, had an effect on the economic recovery,” Papov said.
The city’s COVID-19 public health emergency declaration officially ended, along with additional health orders, Feb. 28, 2023, in alignment with the end of California’s COVID-19 State of Emergency.
Fewer people downtown due to remote work
San Francisco’s office vacancy has yet to recover to what it used to be, and it’s in a much deeper hole than many of the other top job centers. The lack of need for office spaces has been leading to economic downfalls for downtown businesses that thrive on street traffic. Locals continue to leave the city for the suburbs and other places.
“When CEOs said please return to the office, people didn’t. Their lives went on as normal. So many people have taken their San Francisco jobs with them to new places,” Papov said. “Remote work really did a number on the market because it meant that you no longer needed to pay San Francisco rents to work for a San Francisco employer.”
Papov also said that because fewer people are actually downtown working, it’s likely that crime and homelessness will remain a key issue.
Residents are reaching their breaking points as crime continues to rise. Local resident Darren Stallcup told NewsNation affiliate KRON that his neighborhood, the Tenderloin, feels like “the Wild West.”
He recorded a 2 a.m. video to raise awareness surrounding public safety, homelessness, and to expose just how dire the fentanyl epidemic has become in the city.
The San Francisco Chronicle reported that accidental drug overdose deaths began to spike in the mid- to late 2010s as fentanyl infiltrated the local drug market.
There were 625 accidental drug overdose deaths in San Francisco in 2021. However, that was also the first year since 2012 that the death rate in the city has gone down.
Americans’ priorities have shifted
Over the last few years, Americans have generally been looking for more space, prioritizing affordability since the pandemic.
“Those of us in the Bay Area know well that going into these last few years, San Francisco is one of the most expensive places in the world. The people that are looking for more room, more space, places where their dollar goes further … San Francisco has not been that place,” Papov said.
San Francisco experienced great growth in the 1980s, when the population topped 700,000, according to Encyclopedia Britannica.
The cost of living skyrocketed, and the Golden Gate city became one of the most expensive places in the country to live in, fueled by the explosion of venture capitalists.
Papov doesn’t think the city will return to what it used to be, but he believes it’ll reinvent itself anyway.
“It’s just a city that’s constantly reimagining itself. Even now, when there’s so much talk about how San Francisco seems to be lagging behind economically relative to its powerhouse status. … Recently, a lot of the innovation in generative AI is happening right in the heart of San Francisco, and so it’ll have a new phase. But it’s anyone’s guess as to what it will look like.”