San Francisco's last three booms handed large gains to property owners. The windfall from coming IPOs could cause an even bigger transfer of wealth
David Paul Morris / Bloomberg via Getty Images
Everyone in San Francisco knows the script. When a new industry takes off, a small group gets very rich very fast. Housing gets bid up, prices quickly climb out of reach, and the city scrambles to respond. It happened with gold. It happened with dot-com stock. And it happened with social media equity.
The AI boom is testing the same pattern now. OpenAI and Anthropic are heading toward IPOs that could create about 12,000 new millionaires, many with nine-figure fortunes, all concentrated in a single city. The dynamics are the same ones San Francisco has lived through before.
But the city itself is shrinking. None of the three previous booms hit a San Francisco that was losing residents before the money arrived. This one will.
The Gold Rush built San Francisco before the city had the infrastructure to absorb it. The population went from 459 in the summer of 1847 to 20,000 two years later, a fortyfold increase that outpaced housing, sanitation, and governance. Across the state, 80,000 men arrived in 1849 alone, and sailors abandoned 500 ships in the Bay by July 1850. California's total population grew sevenfold in a single year, from 14,000 to 100,000.
Gold Rush wages dwarfed anything workers could earn elsewhere, but prices rose to match, causing a vicious inflation cycle that ate at any prospective gain in purchasing power. Laborers in San Francisco earned about $9 per day in 1849, eight times the $1.10 in Boston, according to a 2026 study in the European Review of Economic History. Feeding and housing a family cost $2.20 per day, and essential goods tracked the same inflation.
But most of the people who came for gold saw little of the wealth it created. Wages peaked during the Rush and then collapsed, falling from about $7 per day in the late 1840s to $1.80 by the 1890s, a roughly 75% decline over four decades. A separate analysis published in the Journal of Economic History found that economic outcomes for miners were "generally small or even zero." Merchants, landowners, and service providers were the ones who saw large positive returns.
The 1990s tech boom was the first to concentrate inside San Francisco's city limits rather than along the Peninsula, and it converted the city's industrial core in the process. SoMa's warehouses became startup offices and live/work lofts in a transformation so thorough the neighborhood earned the name "Multimedia Gulch." Permissive zoning allowed dot-com and multimedia firms to displace traditional production, distribution, and repair businesses, and live/work projects made up the bulk of new housing built after 1996, according to a San Francisco Planning Department report.
The conversion displaced the tenants who were already there. Eviction notices of all types peaked in 1998, led by owner-move-in evictions, which hit 1,410 that fiscal year, according to San Francisco Rent Board data reported by Tenants Together. When reforms curbed that mechanism, Ellis Act evictions took over, climbing from 12 notices in fiscal year 1998 to 440 in fiscal year 2000.
The boom priced out existing residents within four years. Rents more than tripled between 1996 and 2000, and the median Bay Area home price climbed nearly 70% over the same period, according to data cited by the Bay Area research collective FoundSF. The correction matched the boom's speed, with office vacancy rates in San Francisco jumping from 1.7% to 10.3% in just two quarters at the end of 2000, one of the sharpest spikes the Federal Reserve Bank of San Francisco had observed anywhere in 20 years.
Facebook $META's IPO in 2012 inflated home prices block by block, concentrated in the neighborhoods where its employees already lived. Home values in those areas climbed 21% within a year, compared with 17% across the rest of the Bay Area, according to Zillow Research. Every 10 employees in a given neighborhood added another 1.6 percentage points of home value growth.
Homeowners in the right neighborhoods captured the gains. The typical home in an area with a high concentration of Facebook employees appreciated an extra $29,800 in the year after the IPO compared with homes across the rest of the Bay Area, according to Zillow. The same price increases that built wealth for existing owners raised the cost of entry for everyone trying to buy in.
The gains went overwhelmingly to people who were already wealthy. Between 2010 and 2019, median household income among the Bay Area's top 10% of earners grew by about $250,000, according to the Bay Area Council Economic Institute. Among the bottom 10%, it only grew by $4,000, to $15,000 a year. Those lower-level households were spending 92% of their income on rent by 2019, locked out of the homeownership that was building wealth at the top.
Three consecutive wealth booms have shrunk San Francisco's population, driven up its housing costs, and widened the gap between residents who own property and those who rent. The city has been losing more residents than it gains for much of the past decade. From 2016 to 2019, more people left for other U.S. locations than arrived. The pandemic drove even more out, with 55,631 more residents leaving than arriving in 2020-2021. Each boom enriched property owners and pushed lower-income residents out, and none of those residents came back.
The city responded to each boom by accommodating the companies driving displacement rather than protecting the residents being pushed out. In 2011, as the social-media wave gained speed, San Francisco created a payroll tax exclusion for the Central Market and Tenderloin area, allowing companies including Twitter $TWTR (now X) to exclude new payroll from the city's 1.5% tax. By 2013, 15 businesses had used the exclusion, reducing their tax liability by $4.2 million that year.
Each round of tax breaks and zoning accommodations drew in companies and workers faster than the city could build housing to absorb them. That mismatch is what makes property in San Francisco so valuable. Every cycle perpetuates the last. The largest fortunes tend to go to the people who own land, not those who dig the gold or write the code.
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