As a San Francisco local, I cringe every time someone says “San Fran.” Locals know that you can call it San Francisco or SF, never San Fran.
With that understanding, I couldn’t help myself with today’s subject line. San Francisco is the only city in the US where rents are still lower than pre-pandemic rates, and the reason is complicated.
Before we get started – a big shout-out to Logan Nagel from our content team who took the lead on this week’s research.
One more thing – if you’re new here, subscribe to this newsletter. I send one weekly email on Sundays with content like this.
San Francisco rents haven’t recovered …
Recent research from Apartment List shows that San Francisco is the only major American metro area where renters are now paying less (around 3% less) than they did at the start of the COVID-19 pandemic in 2020. Meanwhile, more companies are drawing down their workforces with waves of layoffs.
This week, real estate companies Redfin and Compass both announced layoffs of hundreds, while San Francisco-based Coinbase laid off over 1,000 employees.
San Francisco saw a population drop from the middle of 2020 to 2021 of 6.3 percent, the largest in the country. Additionally, over the course of the pandemic, many tech and business workers moved to remote living arrangements. These factors likely led to a drop in overall apartment demand in the metro area, particularly when compared to the big pandemic-era migration destinations like the cities in the sun belt.
The pandemic struck a deep blow against the attractiveness of major cities, as restaurants, offices, and attractions shut down or reduced capacity. In San Francisco, a city with particularly high rents in general, this may have been too high a cost to accept for many renters.
What are the implications?
It is tempting to compare San Francisco’s problems to other cities like New York or Chicago. For its part, New York saw the second greatest major city population drop in the country.
However, New York also saw massive rent growth even with the pandemic, with a 33 percent jump between January 2021 and 2022. This is the highest figure across all of the 100 largest U.S. cities.
While San Francisco, New York, and other established cities like them share some similar traits, there is a danger in expecting similar outcomes. San Francisco appears to have experienced a perfect storm of population change, tech industry layoffs, and pre-existing high rental rates, leading to its rent stagnation.
That’s all for this week. My wife and I are looking to find a 3-bedroom in SF while rents are low. Drop me a note with your favorite neighborhood in the city.