Re-reading, the whole thing is pretty unclear!

As katydee and thomblake say, I mean that working for SingInst would mean a bigger reduction in my salary than I could currently bring myself to accept. If I really valued the lives of strangers as a utilitarian, the benefits to them of taking a salary cut would be so huge that it would totally outweigh the costs to me. But it looks like I only really place direct value on the short-term interests of myself and those close to me, and everything else is purchase of moral satisfaction. Happily, purchase of moral satisfaction can still save the world if it is done efficiently.

Since the labour pool contains only human beings, with no true altruistic utility maximizers, SingInst should hire and pay accordingly; the market shows that people will accept a lower salary for a job that directly does good, but not a vastly lower salary. It would increase SI-utility if Luke accepted a lower salary, but it wouldn't increase Luke-utility, and driving Luke away would cost a lot of SI-utility, so calling for it is in the end a cheap shot and a bad recommendation.

I live in London, which is also freaking expensive - but so are all the places I want to live. There's a reason people are prepared to pay more to live in these places.

So why not relocate SIAI somewhere with a more reasonable cost of living?

Hmm... Perhaps you don't know that "salary cut" above means taking much less money?

Perhaps that's why he's saying he wouldn't be willing to live there on a low salary?