San Francisco residential rents have increased more than any other US city over the past year, driven by artificial intelligence companies leasing apartments and offering rent stipends to employees.
Apartment prices in the city rose an average of six per cent during that period, more than double the 2.5 per cent increase in New York City, reports The New York Times. The average rent for a San Francisco apartment now stands at $3,315 per month, just behind New York City’s $3,360, the nation’s highest.
San Francisco emerged as the second-fastest growing rental market nationally, with its Rental Competitiveness Index score gaining 5.4 points year-over-year to reach 72.4, driven by the AI boom and more workers returning to offices coupled with an ongoing housing shortage, reports RentCafe. The surge in competitiveness reflects demand that significantly outpaces supply, with so few apartments opening recently that the market has tightened considerably.
Roy Lee’s AI start-up Cluely leased eight apartments for employees in May at a new luxury complex in the city’s South of Market neighbourhood after securing $5.3 million in venture capital funding. The apartments, a mix of one-bedroom and two-bedroom units, are located a one-minute walk from the company’s office, with rents starting at $3,000 per month and reaching $12,000 for penthouse units.ee emphasised the importance of proximity between work and living spaces, describing his vision as creating a community where employees feel at home rather than facing a traditional commute.
The AI-driven rental surge has intensified competition for apartments, with applicants arriving at viewings with cash envelopes and facing same-day rejections. Will Goodman, a principal at Strada Investment Group which developed the luxury complex Cluely leased from, said half of the 501 units were rented within two months of opening in May.
Nearly 50 per cent of San Francisco renters renewed their leases during peak season, up from 47.5 per cent the previous summer, pushing the occupancy rate to 95.3 per cent from 93.3 per cent. Demand for apartments proved so strong that the number of renters competing for each unit nearly doubled, jumping from seven to 13. With occupancy at such elevated levels, just 3 per cent of apartments remain available.
Vacant apartments fill in approximately 41 days on average, two days faster than last summer, reflecting the intensity of competition in the market.
Neighbourhoods near AI companies have experienced particularly sharp increases. Mission Bay, where OpenAI maintains its headquarters, saw rents jump 13 per cent over the past year.
Ted Egan, chief economist for the City and County of San Francisco, noted that whilst market rents remain below prepandemic levels when adjusted for inflation, service workers who left rent-controlled apartments during the pandemic would find returning difficult.
Some AI start-ups actively incentivise proximity. Flo Crivello, chief executive of AI software start-up Lindy, offers his approximately 40 employees a $1,000 monthly rent stipend for living within a 10-minute walk of the office.
Caroline Roche, 25, a demand planner at travel company Backroads, toured about 25 properties in one week before securing a one-bedroom apartment near Golden Gate Park for $3,200 per month. At one viewing in North of the Panhandle, she encountered 20 other couples waiting.
Landlords now receive one to three rental applications on the same day as the apartments list, compared to receiving only a few applications within a month previously, according to Ryan Shane, president of the Housing Guild Management Company.
