A woman walks past a closing retail store in Santa Monica. The COVID-19-induced recession and permanent closing of small businesses will likely spur fundamental changes to local government policies, according to a Los Angeles-based economist. (Photo via International Monetary Fund/Flickr)

A Los Angeles-based economist told the Contra Costa County Board of Supervisors this week that while the current COVID-19-driven recession will likely be much shorter than the Great Recession that started in 2008, it will leave lasting impacts that could require city- and county-government-level policy changes.

During a supervisors’ retreat meeting this week, Christopher Thornberg said that at least some of the increase in employees working from home during the pandemic will be permanent. He also noted that while most sectors of retail have continued to thrive despite the pandemic, much of that activity has shifted from brick-and-mortar to online, and won’t fully go back.

A logical reaction to this by local governments, Thornberg said, would be to change zoning for some business district parcels from “retail” to “retail/mixed use,” which would allow housing in more areas suffering from what he describes as a shortage of rental housing in the Bay Area. These areas, he said, figure to see fewer square feet of space used by businesses; the zoning change could help what he describes as a “jobs-to-housing mismatch.”

“That’s a big conversation for local land-use policies,” said Thornberg, who has given the Contra Costa supervisors similar presentations over the years.

Another big question, he said, is whether local and regional governments should continue to invest heavily in mass transit, especially rail systems. Supervisor Karen Mitchoff, noting significant ridership drops on BART and other passenger area rail systems, asked Thornberg whether such long-term investments are prudent.

“Investing in light rail is a 50-year investment, (but) it’s a 10-year technology,” Thornberg said. In 10 years, he said, use of self-driving electric cars will likely be well-established.

“They should be taking that (transit) money and investing heavily in the road system of the future,” Thornberg said. “The pandemic has accelerated that conversation.”

As for transit operators like BART, Thornberg said they are going to get “hammered,” and will have a hard time finding their footing even after the economic recovery is largely complete.

That recovery, he said, is already well underway around California, including in Contra Costa and Alameda counties. Retail pending in most sectors surged in the second half of 2020; the housing market is “absolutely on fire,” and even small-business license applications are up significantly across the U.S. from 2019.

But other sectors of the economy — restaurants and bars, clothing sales, electronics, appliances, gas stations — are down from 14 to 28 percent from a year ago. Those sectors will need help, Thornberg said, and haven’t been getting enough of that from federal sources like the Paycheck Protection Program (PPP) loans to help businesses keep their workforces intact during the pandemic. Too much of that money, he said, has gone to relatively wealthier businesses and not to small businesses that need it more.

Supervisor John Gioia said he believes the empty office spaces in San Francisco and other urban cores will have a ripple effect on suburban places like Contra Costa. He fully agreed with Thornberg’s suggestion that cities should rezone many of their business districts from “retail” to “retail/mixed use,” to make better use of areas where demand for both retail and office space will never fully rebound with a greater move to working from home.

And while he said that the “macrodata” in Thornberg’s report largely makes sense, it “masks inequalities that happen on the ‘micro’ level,” to individual people. And the COVID-19 economy, Gioia said, is clearly impacting some people more than others.

County government, Gioia said, “can’t get through crises like this without logical, thoughtful federal assistance.”