San Francisco’s ongoing rent wars have entered a new phase.

As artificial intelligence startups continue pouring into the city, competition for apartments has exploded, pushing rents higher than almost anywhere else in the country.

Roy Lee, founder and CEO of AI startup Cluely, made headlines after leasing eight luxury apartments for his employees near the company’s South of Market office. The high-end units — which include rooftop access, concierge service, and rent as high as $12,000 per month — are part of the larger trend reshaping the city’s housing market, per The New York Times.

“Going to the office should feel like you’re walking up to your living room,” the 22-year-old told the Times, explaining that he wanted to keep employees close to cultivate an air of collaboration and comfort.

Within weeks of Cluely’s deal, half the units in the building had been rented out.

“Honestly, I’ve never seen anything like it before,” said Will Goodman, a principal at Strada Investment Group, the firm behind the complex, per the Times.

Driven by venture funding and the rapid growth of companies like OpenAI, Anthropic, and Cluely, San Francisco rents have risen by 6% over the past year, more than double New York City’s increase, per data from CoStar cited by the Times.

That brings the city’s average monthly rent to $3,315, just behind New York City’s $3,360 — and it’s putting added pressure on an already strained housing market.

Rental applicants are showing up to viewings with envelopes of cash and job offer letters in hand, hoping to outbid competitors. “Tech is setting the bar for housing prices,” said Ted Egan, the city’s chief economist, per the Times.

The surge highlights a growing question about AI’s broader footprint. While AI technology can help optimize renewable energy and accelerate breakthroughs, its infrastructure also consumes massive amounts of electricity and water. Running large data centers for large language model training generates massive heat and air pollution, raising concerns about the industry’s overall environmental toll.

As the sector continues expanding, cities like San Francisco may continue to feel the ripple effects, from skyrocketing rents to rising energy demands.

For many locals, that trade-off can feel incredibly personal.