Rental markets in the nation’s hottest tech cities are moving in opposite directions.
The rise of artificial intelligence jobs has revived San Francisco’s rental market, while 1,700 miles away in Austin, Texas, an oversupply of new apartments is driving prices down.
San Francisco and Austin are sitting at the top of very different nationwide lists. According to data from Apartments.com, a CoStar company, the average cost to rent in San Francisco rose 6.3% year over year, and in just January 2026, rents rose 1.07% in the city. However, Austin's rents fell 4.8% over the past year.
The biggest difference between the Austin and San Francisco markets, notable tech hubs with companies like Meta, Google and OpenAI offering employment, is the rental housing supply. Developers have been busy in Austin, adding 17,000 units just in the past 12 months, according to CoStar data. Comparatively, in San Francisco, growth has been slower with only 1,600 units delivered in the past year.
Austin has a much higher vacancy rate of 14% compared with San Francisco's 4.6%. Rent is significantly cheaper in Austin, averaging $1,500 in January 2025. San Francisco's average rent was at $3,380 last month.
AI drives San Francisco's rental surge
In San Francisco, AI is the talk of the town and jobs in artificial intelligence are heating up the rental market in the city. Companies such as San Francisco-based Open AI are expanding rapidly and investing in more artificial intelligence infrastructure.
After years of a soft rental market driven by remote work policies, the tides in San Francisco's rental market have shifted in tandem with the growth of AI jobs.
Alan Mark, a San Francisco-based real estate strategist and development consultant, said the rising prices are a result of the rising demand to be in the city.
"About a month ago, actually two months ago, I started hearing about people signing leases, sight unseen, and they were people coming down from the Northwest," said Mark, who leads the consulting firm the Alan Mark Company.
During the COVID pandemic, streets in San Francisco were quiet and rents were about $2,900 a month on average.
"With AI, the streets are full," Mark said.
From foot traffic on weekdays to snippets of conversations overheard on a hike, AI is what San Franciscans are talking about, Mark said.
"There's this whole other feeling and vibe in the city — it's very, palpable," he said.
Neighborhoods that were less desirable are now filling up quickly.
"You just feel this unbelievable vitality in San Francisco right now," said Mark, who has lived in the city for more than three decades. "Whether it's restaurants, it's traffic, it's [Mayor] Daniel Lurie, the Super Bowl, it really has changed."
High-income hiring eases in Austin
San Francisco's renaissance is against the broader national trend of job and rent growth. In some metropolitan areas, tech hub, Austin, the rental demand is waning.
"Over the last year, or even the last few years, Austin's rental market has shifted from a landlord-driven market to a renter-friendly one," said Joseph Wheatley, an Austin real estate agent with Munoz Group at Compass Real Estate. "Instead of renters competing for limited options, we now have more inventory than demand in many parts of the city."
Apartments.com reports that the average rents in Austin fell 4.8% this past year. Austin saw a boom rental demand driven by tech jobs during the COVID pandemic time frame from 2020 to 2022. Average market rate rents peaked at $1,750 in 2022.
"Austin is still a strong job market, especially in tech and AI, but hiring has become more selective and less explosive than during the pandemic boom," Wheatley said. "We're not seeing the same flood of high-income relocations all at once like we did in 2020-2022."
Builders met Austin's demand and started rapidly building new apartment buildings to supply the growing population. And that growth has not slowed.
"Austin delivered thousands of units in a very short window, like Paseo on Rainey Street, with over 500 units, or Sixth and Guadalupe Tower, with over 300 units," Wheatley said. "And there is still a substantial pipeline of upcoming rental supply. The Travis is an upcoming luxury high-rise with over 400 units, the JLB Cesar Chavez Apartments are under development and Waterline Tower."
With a nearly 5% drop in rent prices from 2025 to 2026, Austin rents could continue to drop with 15,755 units under construction in the city now, according to CoStar. This could provide a break for renters looking to negotiate their leases, but it also gives the city time to adjust to its new size.
"The city grew incredibly fast, and the housing market is now rebalancing after an aggressive growth cycle," Wheatley said. "Long-term, that's healthy. It makes the city more livable, more affordable and more sustainable. This shift doesn't signal decline; it signals stabilization."
Unconventional neighborhoods in San Francisco see growth
Back in San Francisco, the opportunity for growth is limited. Some unconventional neighborhoods, like the manmade Treasure Island that is connected to the city by ferry, have grown recently.
"A lot of younger people are moving to Treasure Island, so that's an area where it's a classic thing when markets get tough, people start discovering new neighborhoods," Mark said, noting he consulted with developers on projects on the island.
San Francisco has endured several ebbs and flows. Today’s surge is just the latest in a long history of being a hot place to live. CoStar reports that premiere neighborhoods such as Mission Bay and South of Market are seeking asking rents over $4,000 per month. When rents rise dramatically, people get priced out.
"I never like to see major increases because it scares people," Mark said. "Not everybody works in tech."