Longtime leasing agents say scoring a rental in San Francisco hasn’t been this difficult since the dot-com bubble.

After a prolonged pandemic-driven slump, the city’s rental market came roaring back this year. Apartment rents have soared by double-digit percentages since last year, the fastest rate among any major city. Competition is fierce: Open houses that attract 30 or more prospective renters in a single afternoon are common, and listed rents might as well be a starting point for negotiations.

“It’s nearly impossible to find an apartment for the average renter,” said Corey Eckert, executive vice president of leasing at Structure Properties.

The average one-bedroom apartment in the city now rents for about $3,300, according to rental platform Zumper, while two-bedrooms typically go for around $4,600. A confluence of factors, including return-to-office mandates, the arms race for AI talent, and the city’s persistent, severe housing shortage, has fueled the frenzy.

Members of Eckert’s leasing team are scouring sought-after neighborhoods in search of under-the-radar landlords with vacant units. And lately, apartment hunters have been beating them to their own open houses, he said. Arriving 15 minutes before one is set to begin may mean being greeted by an eight-person-deep line at the door.

Although rents are surging citywide, they’re only just now matching or exceeding pre-pandemic levels.

Many big cities saw rents drop in 2020 and 2021 as city dwellers with remote jobs left in search of more space, but the decline in San Francisco was among the steepest in the country, and its recovery has taken longer. Apartment List pegs the average rent in the city at about $3,000 today, still a bit below the July 2019 average of $3,234.

Dan Lopez, a senior adviser at Pacific West CRE who specializes in apartment building sales and management, said he first started noticing an uptick in rental demand late last year, which he attributes to the post-Covid recovery, return-to-office trends, and excitement about the city’s new mayor, Daniel Lurie. Lurie took office in January after campaigning on promises to address the interlocking problems of homelessness, mental health, and drugs, and to build more affordable housing.

“I think that’s been the kicker in terms of the rental demand,” said Lopez, a lifelong San Franciscan. “People are actually wanting to be here, and the narrative of the city is really changing.”

AI is also a contributing factor. Workers in the industry have made up about 30% of Structure’s recent applicants, Eckert said. But it’s hardly the only well-paying option in the city. He also sees a number of applications from healthcare workers, thanks to the highly ranked UCSF Health System. San Francisco is also home to other large tech companies like Salesforce, Uber, and Airbnb.

As those workers compete for units, they’re running up against a severe supply shortage. As of July, San Francisco’s apartment vacancy rate was under 4%, according to Apartment List data. Among major cities, only New York’s is lower. The nationwide average is 7%.

It’s long been difficult to build in San Francisco due to strict zoning laws, high costs, and a slow permitting process. New construction nosedived during the pandemic and has yet to bounce back. Last year, the city netted just 1,600 new units, far below its 10-year average of 3,620 homes. It’s fallen off pace of a state mandate to build 82,000 homes by 2031.

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“It is clear that San Francisco, the broader Bay Area, and a lot of California has just not built and expanded its rental inventory the way a lot of other parts of the country have,” said Rob Warnock, a senior research associate at Apartment List.

Jason MacDonald and his wife began searching for an apartment in San Francisco this spring after she got a new job in the city. The process, he said, was “a grind.” The couple toured around 50 apartments and applied for more than 15. Though they both have well-paying technology jobs, they found themselves losing out to couples making four times as much who were willing to pay well over the asking rent.

As their hunt for a two-bedroom unit dragged on, they winnowed their list of must-haves and expanded their search radius.

“We were initially ‘laundry has to be in unit’ people — that went out the window pretty fast,” said MacDonald, 30. So did their hopes of having a designated parking spot. And after their first few rejections, they stopped bothering to apply for units if an open house was particularly packed.

“When you’re one of 50 people at the open house showing, it just doesn’t even feel like it’s worth it,” he said.

After a months-long search, they signed a lease this week. Apart from quickly reaching out to ensure they were the first to see the unit, MacDonald isn’t sure exactly why they won this time.

“We got a call from the listing agent, and he said it was vibes,” MacDonald said. “The owners didn’t care too much. They just wanted someone who wasn’t going to be fussy. We were lucky enough to lock one in, finally.”

In previous hot markets, San Francisco tenants might offer to pay a year of rent up front in an effort to win an apartment, said Amanda Jones, an agent at Compass and a 21-year veteran of the city’s real estate scene. But after offers of “advance rent” were banned, many apartment hunters now resort to bidding up rents. She recently had a luxury unit listed at $6,400 a month. One prospective tenant offered to pay $7,000 on the spot.

“People are just desperate to get into housing,” Jones said. “I think for people that really, really want community and want to be in certain neighborhoods, they’re willing to pay the price.”

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The city’s well-heeled renters often gravitate toward residential neighborhoods like Noe Valley and Pacific Heights, which feature San Francisco’s classic housing stock — pastel-colored, bay-windowed Victorian and Edwardian homes, agents told Yahoo Finance. Younger tenants frequently concentrate their searches in neighborhoods well-connected to public transportation and not far from the sprawling South of Market district, where many of the city’s top employers are concentrated.

Around the city, Jones is increasingly finding that “people won’t take no for an answer,” even if they’ve been told applications have come in ahead of theirs. She’s seen would-be tenants beg to be considered over others ahead of them in line, promising to pay more in rent and drop everything to sign a lease on the spot.

“They’re getting very savvy about what landlords want,” Jones said.

For those still on the hunt and hoping for some price relief, Warnock, of Apartment List, doesn’t see many signs to be optimistic. Barring extreme scenarios like another pandemic or a total AI industry bust, he sees few signs that the city’s current housing supply can keep up with the demand.

“The money flowing into the economy here is growing,” Warnock said. “And as that continues, we know that there will not be the new apartment inventory to absorb the money and the demand that comes from that.”

Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.

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