Affordability in 2025 is defined by three pressures: rent and mortgage costs outpacing wage growth in most metro areas, elevated interest rates that slow construction, and sticky service inflation. The path to relief is different for renters and buyers, but both hinge on supply.

For renters, the key driver is unit delivery. Markets with multi-family completions above 3 percent of inventory are already seeing flat or declining rents. Where zoning and permitting remain a bottleneck, rents are rising twice as fast as local income.

For buyers, affordability is squeezed by rates and inventory. A median household now needs roughly 35 percent of income for a starter mortgage in high-cost metros, compared to 24 percent pre-2020. Rate normalization from 7 percent to the mid-5s would restore roughly 12 percent of purchasing power if prices stay level.

Policy options that matter in 2025: accelerate permitting for multi-family in supply-starved corridors, expand by-right accessory dwelling units near transit, and target down-payment aid to first-time buyers in markets where supply growth is underway. The biggest risk is slow supply response paired with rate cuts, which would reignite price pressure rather than deliver affordability.