SF rents hit $5,000 as AI boom creates 10,000 new decamillionaires

Key Takeaways

• A couple earning $365,000 combined spent three months searching and couldn't find an SF apartment under $5,000/month
• Potential OpenAI and Anthropic IPOs, each valued near $1 trillion, could create thousands more multimillionaires
• Vacancy rates in hot SF neighborhoods dropped from 13% in 2020 to about 3% today

A tech recruiter earning $180,000 and her software engineer partner making $185,000 spent three months hunting for a San Francisco apartment. Their budget ceiling: $5,000 a month. They found nothing. The engineer eventually gave up and moved to Lake Tahoe, where she now pays $1,650 to live with roommates.

This is San Francisco's AI housing crisis in one anecdote, reported by the New York Times. A combined household income of $365,000 can't buy a two-bedroom apartment in the city that now hosts the world's most valuable AI startups.

How bad are SF rents right now?

Average rent in San Francisco sits at $3,827. The median home price has reached $1.7 million. But averages obscure the squeeze at the top. The neighborhoods where AI workers cluster, Marina District and Pacific Heights, have seen vacancy rates plummet from 13 percent in 2020 to roughly 3 percent today.

That 10-point drop in vacancy translates directly into landlord leverage. When three percent of units sit empty, renters don't negotiate. They take what's available or leave the city.

The trillion-dollar IPOs haven't even happened yet

OpenAI and Anthropic each carry valuations approaching $1 trillion. Neither has gone public. When they do, thousands of employees holding equity will convert paper wealth into liquid cash. That cash will bid for a fixed supply of San Francisco real estate.

Venture capitalist Deedy Das of Menlo Ventures estimates the AI boom has already created roughly 10,000 people worth more than $20 million each. OpenAI alone reportedly minted 75 multimillionaires last fall, with individual payouts averaging around $30 million.

The concentration is extreme. A few thousand employees at a handful of companies now hold enough wealth to permanently reshape the Bay Area housing market. And they haven't finished accumulating.

Why six-figure salaries no longer buy housing

San Francisco has experienced tech housing crunches before. The dot-com boom of the late 1990s and the social media surge of the 2010s both drove prices up. But the AI wealth concentration is different in scale.

Previous booms spread wealth across larger employee bases. A successful social media company might create hundreds of millionaires. OpenAI created 75 individuals worth $30 million each from a single liquidity event. The money is more concentrated, which means the bidding wars for premium housing are fiercer.

A $365,000 household income puts a couple in the top 5 percent nationally. In San Francisco, it means competing against people who consider a $5,000 monthly rent trivial.

The Lake Tahoe exit

The software engineer's move to Lake Tahoe represents a broader pattern. Remote work, normalized during the pandemic, gives tech workers an escape valve. You can write code from a mountain town at a fraction of San Francisco's cost.

But this option isn't available to everyone. The recruiter in the original story needs to meet candidates and clients in person. Many AI roles require physical presence for security reasons, collaboration on sensitive projects, or simply because the company culture demands it.

The workers who must stay face an ugly calculation: accept a lower standard of living despite six-figure salaries, or change careers.

What happens after the IPOs

If OpenAI and Anthropic go public at valuations near $1 trillion, the new liquidity will hit San Francisco's housing market within months. Early employees will exercise options, pay taxes, and look for places to put their after-tax millions.

Real estate is a natural destination. It's tangible, tax-advantaged in certain structures, and, in San Francisco, a status marker. The same scarcity that makes housing unaffordable makes it attractive as an investment.

This creates a feedback loop. AI wealth drives up housing prices. Rising prices attract more AI wealth seeking appreciation. The cycle continues until something breaks, whether that's a market correction, a policy intervention, or simply mass exodus of everyone who isn't an AI equity holder.

Frequently Asked Questions

Why can't tech workers earning $365,000 afford San Francisco rent?

Competition from AI company employees with equity worth tens of millions has pushed rents above $5,000 for desirable apartments. A high salary doesn't compete with near-unlimited housing budgets from decamillionaires.

How many multimillionaires has the AI boom created in San Francisco?

Venture capitalist estimates suggest roughly 10,000 people are now worth more than $20 million each due to AI company equity. OpenAI alone created 75 individuals worth around $30 million in a single liquidity event.

Will OpenAI and Anthropic IPOs make San Francisco housing worse?

Likely yes. Both companies have valuations approaching $1 trillion. Going public would convert employee equity into cash that can immediately bid on housing, intensifying competition for a fixed supply of apartments.

What are the vacancy rates in San Francisco's expensive neighborhoods?

Marina District and Pacific Heights have seen vacancy rates drop from 13 percent in 2020 to about 3 percent currently, giving landlords significant pricing power.

Source: The Decoder / Matthias Bastian