AI wealth wave prices out young tech workers in San Francisco

The AI wealth wave is crashing into San Francisco, leaving young tech workers chasing their Silicon Valley dreams feeling like a life with affordable living is out of reach.

Katrine Razniak, 27, moved to San Francisco in 2022 to work as a recruitment specialist at LinkedIn, earning $70,000 a year. Her income rose to $180,000 a year when she joined the software company Rippling, managing a customer success team. Her partner, Adam Woodbury, 39, moved to the city in 2021 and now earns $185,000 a year as a software engineer.

But now, even those earning more than $100,000 a year are finding it difficult to make ends meet in San Francisco.

Earlier this year, Razniak and Woodbury wanted to rent a one-bedroom apartment for under $5,000 a month but couldn't find suitable options. Over three months, the couple viewed about 30 apartments, but either the prices were too high or other renters had already secured them. At one apartment costing $5,200 a month, 30 people had signed up just an hour after the viewing opened.

They decided to stop searching. A question arose: Is it worth settling in a city where even grocery shopping or dinner with friends becomes a financial burden?

"I'm not completely desperate, but I don't think I can continue to stay in San Francisco," Razniak said.

"At some point, we both gradually realized that continuing to live here really doesn't make sense anymore," Woodbury said.

This is because AI companies like OpenAI and Anthropic — both headquartered in San Francisco and valued at nearly $1 trillion — are preparing to list on the stock market, bringing with them the emergence of a new super-rich class in the AI industry with spending power far exceeding the rest of the tech world. According to an analysis by Sacra, a private market research firm, OpenAI, Anthropic, and Elon Musk's SpaceX alone could create more than 20 new billionaires among their current and former employees.

"I feel like I'm no longer qualified to live here just because I don't work for an AI company," Woodbury said, even though his salary is still among the top 20% of households in the US, according to US Census Bureau data.

Recently, Woodbury moved to Carnelian Bay by Lake Tahoe, California, where the cost of living is lower. Meanwhile, Razniak remains in San Francisco, living in an apartment in the Haight-Ashbury neighborhood with two roommates, paying $1,650 in rent per month. The couple is currently maintaining a long-distance relationship.

San Francisco has long struggled with the cost of living, but the problem has become more severe as OpenAI, Anthropic, and a host of other startups attract a wave of AI workers to the city. According to the latest data from the Council for Community and Economic Research's Cost of Living Index, the cost of living in San Francisco is now 65.6% higher than the US average.

Housing is the biggest driver of the rising cost of living. According to a Redfin report, the median home price in San Francisco exceeded $1.7 million in April, far higher than the national median of about $450,000. In recent months, the average apartment rent in the city has also surpassed New York to become the highest in the country, at $3,827 per month, according to real estate data firm CoStar.

According to CoStar data, the vacancy rate for apartments in some areas of the city, such as the Marina District, Pacific Heights, and South of Market, is now only about 3%, a sharp decrease from about 13% in 2020. Meanwhile, new housing construction projects have almost stalled.

Not only are housing prices escalating, but many other expenses are also significantly more expensive. According to the Cost of Living Index, electricity, water, and utility costs in San Francisco are about 41% higher than the national average, transportation costs are about 43% higher, and food prices are about 19% higher.

Ted Egan, Chief Economist for the City of San Francisco, said that high-income earners have long had to weigh the trade-offs of living in the city or moving to a place with a yard and a garage.

According to him, the difference now lies in the scale of the new wealth wave. "When Uber went public in 2019, the company was valued at about $82 billion. Meanwhile, OpenAI and Anthropic are now estimated to be worth more than 10 times that amount," Egan said.

In a statement, Mayor Daniel Lurie said the city government is working to reduce the cost burden on residents by expanding childcare services, implementing new zoning plans to increase housing supply for families, and improving public transportation. However, he did not directly address the concerns of the income group earning over $100,000 per year.

For Razniak, the cost of simply maintaining her life in San Francisco has become a significant pressure. Her monthly expenses are now about $1,000 higher than a few years ago, even though her life has remained largely unchanged.

Although her income has more than doubled since moving to the city, Razniak said she doesn't feel rich, but she's not living paycheck to paycheck either. Instead, she has to carefully consider every expense, something she never thought she would have to do.

"I used to think that once I earned $200,000 a year, I wouldn't have to worry about money anymore," she said.

She added that since last year, she and her friends have stopped dining out, opting instead for shared meals at home and watching reality TV shows together.

The demand for affordable housing among skilled workers is increasing rapidly. This month, Varsha Madapoosi, 25, who lives in the Lower Pacific Heights neighborhood and works in fintech, posted listings for two vacant rooms in a four-bedroom, one-bathroom house she is renting, at prices of approximately $1,200 and $1,500 per month, respectively.

She posted the information in a private Facebook group, along with a Google form for interested parties to register, and only kept it open for 24 hours.

Immediately, she received 88 applications.

Meanwhile, in July last year, a room for rent at about $1,400 received only 28 messages over four days.

"I've never seen this level of interest," Madapoosi said.

Jolie Gan, 23, moved to San Francisco in January after completing her Fulbright scholarship at the Massachusetts Institute of Technology (MIT). She now holds two jobs: one at the venture capital firm Andreessen Horowitz and another as a contributor to the tech and science magazine Core Memory, with a combined income of about $250,000 per year.

In just two months, she and her roommate had to move three times. On one occasion, they left because the apartment advertised as having two bedrooms did not actually have them; another time, it was because the building had mold and mice.

With an income of $250,000 a year and no student loan debt, Gan said she can still afford to live and even save for retirement.

However, she notices that many friends earning less than $200,000 a year are under immense pressure, as rent, utility bills, and food costs consume almost all of their monthly income.

Despite this, Gan said she is determined to stay in San Francisco for the next few years due to career opportunities, the city's vibrant lifestyle, and the relationships she has built.

Meanwhile, Razniak and Woodbury have started thinking about moving to Seattle.

According to Razniak, their combined income is a dream in many places in the US. But in San Francisco, it's still not enough for them to realize the life they want.

"We want a house, we want a garage, we want a storage room. Here, those things are simply out of reach," she said.