The state of affordable housing construction in 2025
In its latest multifamily report, Yardi Matrix analyzes affordable housing deliveries in major markets, the factors that influence development of tax-credit properties, and why starts are declining at a time when demand is at unprecedented levels.
Completions of affordable housing properties are set to reach a multi-year high of 78,000 in 2025, according to the latest National Affordable Housing Report by Yardi Matrix.
Yardi Matrix’s latest report on the affordable housing market examines historical and projected development in the U.S. and major markets. The report explores the factors driving affordable property development, as well as the decline in new starts despite record-high demand.
Affordable Multifamily Housing Deliveries Set to Peak in 2025
The U.S. faces a shortage of affordable housing units, estimated at upwards of seven million, according to the report. While demand for affordable housing won’t stop growing, deliveries will.
Affordable housing starts fell by 28.7% to 66,000 in 2024, the lowest number since pandemic-era 2020. Although, similarly, the fall of market-rate apartments fell even faster—a 47% drop to 208,000 in 2024 (the lowest it’s been since 2013).
The result of this is that the share of affordable housing construction is increasing for all multifamily development activity. In 2024, fully affordable units comprised nearly 19% of multifamily starts, up from 14% in 2023.
This shows the growing importance of affordable housing in the U.S. Another factor that may see change in 2025 is the importance of federal tax programs like the Low-Income Housing Tax Credit (LIHTC). It’s estimated that one-quarter of apartments built in the U.S. between 2000 and 2019 were supported by LIHTCs.
With a new administration taking office, the potential for change is “enormous,” says the report. “Developers can expect to retain favorable tax treatment for construction projects and lower corporate taxes.”
Overall, the total amount of multifamily starts fell 46% in 2024 to 353,000 units, from 652,000 units in 2023.
Affordable Housing in 2025 by Metro
Affordable housing is not the same across the country, however. Matrix finds that California, Florida, and Texas lead the nation in the development of new affordable housing. California has 166,000 fully affordable units, followed by Florida (6,688), Texas (4,537), New York (2,480), and North Carolina (2,122).
In the private sector, 14 different metros have at least 1,000 fully affordable units that are under construction. This is led by Austin (2,717 units), Miami (2,687), Los Angeles (2,196), Salt Lake City (1,861), Sacramento (1,613), San Diego (1,479), and San Francisco (1,462).
As we approach 2025, the landscape of affordable housing in the USA is evolving, offering new opportunities for both first-time homebuyers and seasoned investors. Whether you’re a first-time homebuyer seeking your dream home or an investor looking for affordable housing investment opportunities, the U.S. real estate market offers a wealth of options. In this blog, we’ll explore the top affordable housing options for homebuyers, along with key trends, government programs, and investment opportunities.
Affordable Housing USA 2025: An Overview
Affordable housing continues to be a hot topic across the U.S., especially with increasing home prices and interest rates. However, the outlook for affordable housing in 2025 presents some promising trends. Cities across the country are seeing a growing demand for affordable housing, which is reshaping the housing market. According to the Affordable Housing Coalition, the demand for affordable homes is expected to grow by 20% in 2025. Homebuyers in areas with lower property costs, such as suburban or rural locations, can expect more affordable pricing.
While the definition of “affordable” may vary depending on location and income, the general consensus is that affordable housing options should not exceed 30% of a household’s income. In 2025, these types of homes are becoming more accessible due to a combination of government initiatives, shifting market dynamics, and growing interest from investors.
Affordable Housing Market Trends USA 2025
One of the most significant trends in affordable housing for 2025 is the rise of “micro-homes” and “tiny homes.” These compact living spaces offer a more affordable and eco-friendly alternative to traditional housing, making them an attractive option for first-time homebuyers USA 2025. In urban centers, where land is scarce and expensive, micro-homes are becoming an increasingly popular choice. They offer the benefits of homeownership without the hefty price tag, making it possible for young professionals or small families to invest in real estate.
Additionally, modular homes and pre-fabricated housing are gaining traction as affordable housing solutions in 2025. These homes are often more cost-effective to build and maintain, reducing the overall cost of homeownership. The increased interest in sustainable living and energy-efficient designs is also pushing the market toward these alternatives, which promise to lower utility bills and reduce the environmental footprint.
Another key trend is the continued rise in suburban housing. As more people embrace remote work and flexibility, many are choosing to relocate from crowded urban centers to suburban or even rural areas, where they can find larger homes for a fraction of the cost. For first-time homebuyers USA 2025, this shift presents an opportunity to explore more affordable properties outside of expensive metropolitan areas.
First-Time Homebuyers USA 2025: A Guide to Navigating the Market
For first-time homebuyers, 2025 presents a wealth of opportunities to secure affordable housing options. However, the process of buying a home can feel overwhelming, especially in a competitive market. To make this process easier, it’s essential to understand the key aspects that can help you navigate the housing market successfully.
One of the most important factors for first-time homebuyers USA 2025 is knowing where to look. Suburban areas, especially those in the Midwest and Southeast, offer affordable housing options that cater to young families and individuals starting their homeownership journey. Cities like Atlanta, Houston, and Phoenix are expected to see strong growth in affordable housing options in 2025.
Another vital element is understanding financing options. Many first-time buyers qualify for government programs designed to make homeownership more attainable. In 2025, low-interest rates are expected to remain for many first-time buyers, making mortgages more affordable. Programs like FHA loans, USDA loans, and VA loans are excellent resources for those who meet the necessary criteria. Additionally, several states offer down payment assistance programs, which can significantly lower the upfront costs of purchasing a home.
Affordable Housing Government Programs USA 2025
In 2025, affordable housing government programs are expected to play a critical role in helping buyers secure affordable homes. These programs can provide first-time buyers with the financial assistance they need to make homeownership more attainable.
For example, the Low-Income Housing Tax Credit (LIHTC) program is one of the most successful federal programs that encourage the development of affordable rental housing. This program has been a key factor in creating millions of affordable rental units and continues to expand its reach in 2025.
The Section 8 Housing Choice Voucher Program provides rental assistance to low-income families, helping them afford quality housing in the private market. Additionally, the Homeownership Voucher Program helps low-income families purchase homes by providing assistance with down payments and closing costs.
State and local governments also offer various programs to assist with home purchasing. These programs may include down payment assistance, closing cost assistance, and low-interest loans for qualifying buyers.
Affordable Housing Investment Opportunities USA 2025
For investors, affordable housing presents a wealth of opportunities in 2025. The demand for affordable homes is expected to remain high, making it a lucrative sector for long-term investment. Several investment strategies are gaining popularity in the affordable housing market, such as real estate investment trusts (REITs), multi-family housing units, and tax credit investments.
Investors are increasingly looking to affordable housing as a stable and sustainable investment. Multi-family properties in emerging suburban areas, for instance, are offering high returns with lower risks. This type of real estate investment is especially appealing in 2025, as the demand for rental units continues to rise due to a growing population and shifting housing preferences.
Another significant trend in affordable housing investment is the increasing focus on sustainability and energy efficiency. Investors are capitalizing on eco-friendly and energy-efficient housing, which reduces long-term operational costs and attracts environmentally conscious tenants.
Conclusion
As we approach 2025, the affordable housing market in the USA is offering an array of opportunities for homebuyers, especially for first-time buyers, investors, and those seeking government assistance. With trends like micro-homes, sustainable living, and government support, the future of affordable housing is looking bright. Whether you’re a first-time homebuyer looking to enter the market or an investor seeking lucrative opportunities, there has never been a better time to explore affordable housing in the USA.