IEN2020

Well technically the only thing you need to do is log in to your admissions portal, find the question "are you attending" and click "no". That form may also ask you which school you ended up choosing and why etc.
Now typically you would also email the program director, as well as other faculty / admin people who you've been in contact with, to let them know that you've decided to go somewhere else. It doesn't have to be long, just say you are grateful for their offer, but after serious considerations you've found school X to be the best fit for your graduate career. If it applies, say that you'll keep them in mind when thinking of a postdoc (or any sort of next stop in your academic career).

I think this is a difficult decision and I would say you should do like another suggested and make a pros and cons list.  The thing I would put more weight on is your ability to maintain your mental health.  Do you think the issues with your number 2 school will be detrimental to your education and personal career path?  Are there ways to work around them?  If you are not happy in your current community, I suspect that will carry over to how happy you will feel committing to the community for another couple years.  Hope you are able to make your choice based on what is best for you and that you have a wonderful experience!