COVID retail collapse, remote working boost housing options


It is no secret COVID-19 is vastly changing the world we live in. The boom in e-commerce and remote working combined with the collapse of brick-and-mortar retail could provide a once-in-a-century opportunity to reimagine the modern American city.

Former state Controller Steve Westly (Photo courtesy of Steve Westly)

There are daily headlines documenting the great exodus from coastal cities to the heartland. Even with vaccines becoming available, these trends are unlikely to end after the pandemic. Twitter, Facebook and Google have all taken steps toward an increasingly work-from-home-force. Others will undoubtedly follow suit.

The good news is that the challenges brought on by the coronavirus are also presenting opportunities to solve longstanding problems — most important, the housing crisis. What happens when workers are no longer tethered to their office and traditional retail continues to contract?

Here is what to expect in a post-COVID world and how to ensure our cities survive and prosper:

First, workers aren’t going back to the office soon. Google announced in July that its roughly 200,000 employees — a quarter of whom live (or lived) in the Bay Area — will stay home until at least July 2021. Facebook foresees a half-remote workforce by 2030, and Twitter announced that its employees could permanently operate from home. Without geographical constraints to live near company headquarters, nose-bleed housing costs in cities such as San Francisco, New York and Washington, D.C., will be driven down.

Second, brick-and-mortar retail will continue to decline. UBS, a large global bank, predicts 100,000 retail stores will close by 2025. Empty malls are already highly sought-after candidates for apartment complex developments, and big box stores will become e-fulfillment centers. Some downtown retailers will of course remain — particularly those who have invested in quality. But the revolution in online shopping will continue creating an opportunity for smart city planners to convert retail centers into housing, creating downward pressure on rents as demand decreases.

Third, the combination of these forces creates the potential for a “grand bargain.” California lawmakers failed last year to usher in major housing changes, but as Senate Pro Tem Toni Atkins said, “Things have altered and we had to pivot a bit because the world looks very different today.”

Lawmakers propose allowing developers to reduce time-consuming and expensive local environmental reviews and build higher and tighter for projects converting single-family homes on large plots into duplexes or four-plexes or converting vacant retail space to housing. In return, cities could scale back single-family-only zoning and zone more space for low-income housing.

Meanwhile, e-commerce expansion and delivery options create a self-fulfilling prophecy where workers can work further from cosmopolitan centers but with all the amenities of large metropolises. Yet, cities (and states) will have to adapt to how local governments will fund themselves.

Smart cities will move quickly to rezone business and retail areas and to increase zoning for housing. With fewer taxes from retail sales, cities will also need to get creative about new sources of income, whether it be increasing shares from online sales tax, property tax reform or other sources. Cities will also need to require mitigations from developers to provide more parks, common spaces and sports fields for the public to make cities more livable.

While COVID has caused massive reduction in intermediaries between producers and consumers, it has primarily sped up trends that were already underway. This creates an opportunity for city planners to reimagine opportunities to solve our housing crisis. Starting now will ensure cities can both adapt to more remote workforces and make full use of reimagined spaces.

This is our chance to solve our housing crisis and do what California does best: Lead the nation into the future.

Steve Westly served as California state controller from 2003-7. He is a former vice president with eBay, former Tesla board member and founder of The Westly Group, a sustainability venture capital firm. 



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