This is a new term to be learned, “doom loop”.
“Wealthier residents, liberated from the office by remote work, are leaving the Bay Area at a higher rate than before the pandemic — a trend that could exacerbate a dreaded economic “doom loop” for the region’s slowly recovering job centers and downtown cores.
In 2021, households earning more than $150,000 made up 32% of all those moving out of the nine-county Bay Area, up from 27.6% in 2019, according to a new analysis of census data by the Bay Area Council Economic Institute.”
As more firms, like Salesforce, close their bay Area operations, the highly paid executives and techs will leave California. This harms the region—but also harms the State. Fewer highly paid workers means fewer taxes. The California budget deficit is being exacerbated by the doom loop.
Bay Area exodus: Wealthy resident departures worsen ‘doom loop’ fears
The growing exodus could exacerbate economic challenges for Bay Area downtowns
By ETHAN VARIAN, | Bay Area News Group, 4/13/23
Wealthier residents, liberated from the office by remote work, are leaving the Bay Area at a higher rate than before the pandemic — a trend that could exacerbate a dreaded economic “doom loop” for the region’s slowly recovering job centers and downtown cores.
In 2021, households earning more than $150,000 made up 32% of all those moving out of the nine-county Bay Area, up from 27.6% in 2019, according to a new analysis of census data by the Bay Area Council Economic Institute.
Although most of those departing are lower-income residents struggling to afford the region’s high housing costs and living expenses, the uptick in wealthy households moving out is beginning to strain local tax bases, said Abby Raisz, the institute’s research director.
“The implications are really serious,” Raisz said. “We have to start thinking pretty creatively to break this cycle.”
Downtowns across the Bay Area grappling with how to respond to shuttered businesses and empty office buildings are also facing less money flowing into public budgets for essential services and transit. The multiple challenges could leave cities trying to dig out of a deeper hole amid a time of economic uncertainty.
Between 2019 and 2021, the San Francisco metro area, which includes the East Bay and Peninsula, saw its population fall 2.3%, while San Jose’s population dropped 1.9% — a collective loss of 147,000 residents. More people moved away, but a decrease in births, increased deaths and fewer people migrating to the region were also factors.
During that period, the median household income in the San Francisco metro area fell 4.6% to $116,005 a year, according to a recent census report, reflecting the loss of high-income earners seeking out more affordable places offering a different lifestyle. Data for San Jose was not included in the report.
While the region’s downward population trend slowed significantly last year, owing to a spike in international immigration after it plummeted during COVID, the shift to remote work means more white-collar employees could continue saying goodbye to the Bay Area.
That’s true for Saji Kumar, 50, who works as an advertising and branding consultant for tech companies and owns a home in Livermore. He and his wife are considering moving somewhere in the mountains in Arizona or New Mexico where they can buy a less expensive home and put away the savings for early retirement.
“It doesn’t really give us any advantage to live in the Bay Area,” Kumar said. “You can be sitting anywhere in a cheap city as long as you have good WiFi.”
According to the economic institute’s report, the top destinations for people leaving the region are still in California, including Los Angeles (12% of movers), Sacramento (11%) and Santa Cruz (4%). Others have moved to more affordable towns on the outskirts of the Bay Area, such as Tracy or Hollister, Raisz said.
Russell Hancock, chief executive of the civic nonprofit Joint Venture Silicon Valley, said that even as more white-collar workers move out — and tech companies have shed thousands of local employees this year — the Bay Area remains a “locus for innovation.”
“Yes people are leaving, but companies are not, and that’s very significant,” Hancock said. A notable exception? Tesla, which moved its headquarters to Texas but still maintains a sizable workforce in the region.
But fewer people coming into work, even on an occasional basis, means those companies are cutting office space and their employees are spending less at shops, restaurants and bars in local job centers.
“We’re not generating sales tax the way we used to, and there is a doom loop for our downtowns,” he said.
Already, most of the region’s major cities — including San Jose, Oakland and San Francisco — are projecting budget shortfalls next year. And the hit to city coffers could make it difficult to alleviate homelessness and crime, which Raisz said the institute has found are the issues most concerning residents and business owners about Bay Area cities.
Raisz said cities are looking at new ideas to reinvigorate downtowns, including converting empty office buildings into housing. But with more office leases set to expire in the coming years and many small businesses hanging on by a thread, civic leaders will likely need to act fast to prevent a downward spiral.
“We might be heading for a much worse budget deficit by 2025,” she said.
