A tale of two tech cities

Austin, from Lady Bird Lake. Photo: Phil Evenden / Pexels.

Austin kept building through its boom

The frenzy of 2021 looked like a gift to anyone who could put up an apartment building in Austin. Rents were climbing, interest rates were at rock bottom and people kept arriving from other cities, which made it, as Jake Wegmann of the University of Texas told KUT, "a really great place to get into the apartment-owning business." The local joke became that the official bird of Austin was the crane.

A metro gaining renters that fast would normally see rent go up. But a building takes about two years to go from buying the land to welcoming tenants, so everything planned in the frenzy opened into the same market at about the same time. Developers added almost 50,000 rental units in 2023 and 2024, the biggest percentage gain of any major US metro, and for a while, says Daniel Oney of the Texas Real Estate Research Center, "there were four apartments for every household that showed up."

You could feel the balance of power change. Mycah Miller, a graduate student in a 1960s apartment in Hyde Park, had just taken a rent rise of nearly 15% when she mentioned to the landlord, during a plumbing repair, that she was thinking of moving somewhere cheaper, and weeks later an email arrived lowering the rent by $40. In the heart of downtown, a tower with an indoor cinema and a 20th-floor pool was offering up to eight weeks free. Rents in older, cheaper buildings fell hardest, about 11% in a single year, which reaches people who were never going to rent a tower, although Walter Moreau, who runs the housing nonprofit Foundation Communities, says "folks with really tight budgets are still really stretched."

It would be easy to put all of this down to empty Texas land, and Austin certainly has it, with apartments going up in places like Georgetown and Leander. But 63% of the apartments permitted in the metro from 2019 to 2023 were inside Austin's city limits. Those limits are wide, so not all of that is the urban core, but downtown now has apartments in towers of 66 and 74 stories, and zoning the city created in 2007 to allow more apartments per site and far less parking accounts for more than 17,600 homes built or under way.

None of it came easily. Austin spent five years and $8.5 million rewriting its building code before the city council killed the effort in 2018. When the council tried again, a group of homeowners sued and won in 2020, then won again in 2023 over a later set of reforms. As rents soared, housing became the top issue in local politics, and since 2022 the city has gone after permit delays, loosened limits on the height of buildings near single-family homes and become the largest US city to end parking mandates. Those newest changes came too late to explain the cranes of 2021, which owed more to a hot market and older reforms like that 2007 zoning.

Austin is not a one-off either. Across 47 big metros, the more apartments a metro permitted in 2019 to 2023, the softer its asking rents since Sep 2023 (r = −0.66, p < 0.001, and −0.59 without Austin).

That wave is now going out. Some builders were already dismantling their cranes by early 2024, the Austin metro's rent has stopped falling, up 0.7% in the past year, and Oney reckoned in January that the empty apartments would take about three years to fill if nothing new were added.

San Francisco, with the Transamerica Pyramid. Photo: Mo Eid / Pexels.

San Francisco's slump came and went with little built

The San Francisco metro had the opposite few years. Asking rents fell 8.2% in 2020 and took until 2022 to get back, and by 2025 the metro had 5.8% fewer working residents than in 2019, the biggest drop of any big metro. A soft market is when you would want to line up the next round of housing, and one parking lot shows how that went.

In October 2021 developers had plans for 495 apartments on a Nordstrom valet lot at 469 Stevenson Street in SoMa. At a hearing about the project's environmental review, the Board of Supervisors voted to hold it up, with only three supervisors on the other side, and the mayor at the time, London Breed, fumed: "If you're wondering how we got into our housing crisis, this is how." The state housing department opened an inquiry, and the city approved the project in 2023. A state review that year found that from 2018 to 2021 San Francisco took a median of 34 months to approve an apartment project, more than ten months longer than the next-slowest place in California.

Then the AI boom arrived, and there was little new housing waiting for it. The brokerage JLL counted two leases by AI companies in the city in 2020 and 167 by early 2025, which helped pull office vacancy from above 35% to about 30%. The city's chief economist, Ted Egan, says "AI is the big reason" rents are growing so fast, even though tech job growth has been muted because AI "is eliminating jobs as well as adding jobs." A one-bedroom corner unit in Rincon Hill that rented for $5,140 last year went for almost $6,800 this year, and an agent with a $55,000-a-month house in Pacific Heights described its target renters as "very young, very wealthy, and very much terrified of commitment."

Asking rents in the metro are up 11.8% in a year to a record $3,445, the most of any big metro, and in the city itself they are up 26.4% to $4,784, against 10.8% in Oakland across the bay. Zumper, which tracks listings, puts it down to AI hiring and very little new supply, and in September, standing in Alamo Square Park, Mayor Daniel Lurie declared a rent emergency, a largely symbolic step that came with proposals to protect tenants.

Not everyone is paying those prices. San Francisco's rent control generally covers apartments in buildings first occupied before June 1979, where the allowed increase this year is 1.6%, so someone who has stayed put may barely feel the boom. The rents in this story are for the next lease, or as Quintin Mecke of the Council of Community Housing Organizations puts it, "what landlords believe they can get from the next tenant, not what sitting tenants are paying."

San Francisco can't spread out, so it has to build up

Comparing building in these two places only goes so far, because they are shaped so differently. The city of San Francisco is 47 square miles of land with water on three sides, and 826,000 people already live on it, nearly six times as densely as in Austin, whose city limits take in 326 square miles. The metros differ too: the San Francisco metro wraps around a bay on 2,470 square miles of land, and the Austin metro has 4,220 and can keep spreading. A builder around Austin can still start with an empty field, while a San Francisco builder has to find a parking lot or replace something, and usually go taller.

Land alone doesn't settle it, though. Seattle, squeezed between Puget Sound and Lake Washington, has fewer people than San Francisco and less than twice the land, and from 2019 to 2023 it permitted 35,800 apartments to San Francisco's 10,500. Boston has almost the same land as San Francisco and permitted 14,700. Manhattan has less than half the land and permitted 17,900, and Brooklyn, on about one and a half times the land, permitted 51,000.

Much of the rest comes down to San Francisco's own rules. Across most of the north and west of the city, buildings are limited to 40 feet, or about four stories, and the city's planners say 90% of housing was built outside the state's "housing opportunity areas", even though those areas, largely on that side of town, cover over half the city. In December 2025 the supervisors passed the Family Zoning Plan, which lets owners fit more homes inside the 40-foot limit and allows taller buildings on major transit and shopping streets. Of the sites it covers, 77% get no extra height, and buildings with three or more rent-controlled units are exempt. It makes room for 36,000 homes on paper, but the city's chief economist projected 8,500 to 14,600 over 20 years, and it has been sued from both sides, over its environmental review and over whether it does enough to meet state housing law.

New rules don't pay for a building, either. Janan New of the San Francisco Apartment Association says "the cost of construction is just skyrocketing," and only 489 homes had been completed in the city this year by the time the mayor declared the emergency. Mecke describes the mismatch in one line: "Rents respond to a demand shock in months," while housing "takes years from entitlement to occupancy." That lag runs through this whole story. Austin's cranes went up in a boom and its rents came down years later, once the apartments opened, and whatever San Francisco's new rules produce will arrive long after this year's renters have signed their leases.

Where does your metro stand?