San Francisco is thriving thanks to booming tech and tourism industries but still has room for improvement, Mayor Ed Lee said during his first "State of the City" address Monday.

Speaking for more than an hour Monday morning in front of most of the city's top officials and other dignitaries, Lee outlined the economic improvements San Francisco has made in recent years.

"The state of our great city is vital, resurgent and strong," he said.

Lee noted the city's unemployment rate is at 6.5 percent, a drop of more than 3 percent over the past two years, while 26 large cranes currently dot the city's skyline constructing new buildings like the new Transbay Center, which will include the tallest building west of the Mississippi River.

"We're living today in an extraordinary city in an extraordinary time," he said.

Much of the economic success is due to the roughly 18,000 tech companies in the city as well as tourism and business travel, which bring $8.4 billion in spending to the city each year, the mayor said.

Lee said while business is booming in San Francisco, the city's lack of housing options has caused rental prices to skyrocket.

"We cannot defy the laws of supply and demand," he said.

Lee said 42,000 new units have been approved for construction in the city over the next several years, while a housing trust fund approved by voters in November will create a $1.5 billion stream of funding over the next 30 years for low-income housing and first-time homebuyer assistance.

He also proposed overhauling San Francisco's beleaguered Housing Authority with input from federal officials on how to improve public housing in the city, including possibly replacing the agency with a new model built on public-private partnerships.

"What we're doing right now with our public housing isn't working," Lee said. "If we can't mend that structure, we should end it."

Lee's speech was made at College Track, an organization in the city's Bayview District that assists youth looking to go to college.

He said he chose that location to emphasize his focus on education, saying he is proposing nearly $50 million in his next budget for public schools and $25 million for universal pre-school.

Lee said he was also committed to keeping City College of San Francisco open despite accreditation concerns that threaten to close the school.

"It's too important for our city's social and economic future," he said.

Lee's first "State of the City" speech comes at the start of his second year as elected mayor. He was appointed interim mayor in January 2011 when Gavin Newsom took office as lieutenant governor and then was elected that November.