San Diego Overtakes San Francisco on New List of Cities With Most Expensive Rents

San Diego rents have surpassed San Francisco’s — one indicator that West Coast tech hubs aren’t rebounding from the pandemic like their East Coast counterparts. 

Typical San Diego rents stand at $3,175, surpassing notoriously expensive San Francisco rents by $7, according to Zillow’s June index reading released Monday. The Zillow Observed Rent Index looks at changes in asking rents over time, which they call "typical" rents.

San Diego rents were 29% below San Francisco’s right before the pandemic, according to Zillow’s estimates, but grew much faster in the last couple of years. The city’s typical rent was 5.3% higher in June than the same period last year. The surge in prices reflects a nationwide shift toward sunnier, Southern cities.

“We've seen movement toward the Southeast, toward the Sun Belt, and growing demand there,” said Jeff Tucker, a senior economist at Zillow, “That has been happening within California as well.”

People moved from big cities at the height of COVID-19. But Northeastern cities rebounded. Boston, Massachusetts; Providence, Rhode Island and Hartford, Connecticut have the fastest-rising rental markets in the U.S. at present, according to Zillow’s report. New York City, the second-most expensive city by Zillow estimates, saw rents rise 5% in June from the same period last year. 

Meanwhile, West Coast cities driven by tech jobs like Seattle, San Francisco and San Jose haven’t seen a resurgence in rent growth since the effects of the pandemic waned like their East Coast counterparts. Rent growth is negligible at 1% in Seattle, 1.2% in San Francisco, and 1.5% in San Jose.

That’s because West Coast cities had a more complete, sustained shutdown during the pandemic and a slower recovery, said Tucker.

“The return to the office has been much more piecemeal and start-stop in Seattle and San Francisco,” said Tucker.

The slowdown in tech hiring, layoffs and the option for employees to work remotely have all driven West Coasters to move away from chilly tech hubs toward cities where renters can get more square feet for their dollars and enjoy better weather.

The consequence — prices in sunnier cities are soaring.

“People are getting more space for their money,” said Tucker, but “that bargain is starting to disappear as people take advantage of it.”

Case in point: San Diego. Even though Northeastern cities are seeing a resurgence, Southeastern cities are still experiencing high rent growth. Charlotte, North Carolina and Memphis, Tennessee, have seen rents 4% higher than last year.