The dream of homeownership in Central Indiana has never been more challenging to achieve.

According to the 2025 Update to the Indianapolis Metropolitan Area Housing Affordability Report by the Common Sense Institute (CSI), affordability in the Indianapolis Metro Area is near its lowest point in more than seventeen years. The CSI report clearly documents the fundamental imbalance: household incomes simply haven’t kept pace with the dramatic, externally driven surge in home ownership costs. Additionally, there are also barriers within the community created by policy and external market forces that are preventing builders from constructing the homes that fit the profile of homebuyers in this area.

High Mortgage Rates and Regulatory Costs Pressure the Consumer

To measure the true impact on residents, CSI analyzed the labor burden (the number of hours of work) required to secure a home. The findings are sobering: the amount of time the average laborer must work just to cover a median mortgage payment has skyrocketed by 112% over the last decade. It now requires 54.7 hours of work per month – approximately 30% of a month’s earnings – just to cover the mortgage on an average priced home. This dramatic climb has been driven primarily by two external pressures:

  • Surging Interest Rates: High mortgage rates, set by national economic conditions, have inflated the total cost of ownership, rapidly eroding buyer purchasing power.
  • Regulatory Hurdles: Every new unit must absorb the accumulating costs associated with local regulatory expenses, fees, and slow, slow permitting and review processes.

When these factors combine, they squeeze the potential homeowner. While the average hourly wage in the metro area increased by 31.6% over the past decade, the cost of the mortgage alone more than doubled. This pressure is reflected across the metro area, with Madison County and Marion County showing the largest declines in affordability.

The Missing Middle: A Supply and Policy Problem

This affordability crisis is fundamentally a challenge of supply that matches demand.

The CSI report highlights a massive housing deficit in the Indianapolis metro area estimated at 28,029 to 74,009 units at the end of 2024. To close this gap and keep up with projected growth by 2028, the region needs up to 25,984 new permitted units annually. Current permitting rates are falling significantly short of this goal.

This is where the policy discussion is crucial. It needs to be easier and faster for builders to get new housing permits approved for achievable housing. For the Indianapolis area overall, the CSI data shows:

  • The supply of mid-range homes ($200,000 to $499,999) exceeds the number of households with the mortgage capacity to buy them.
  • There is a critical undersupply of both entry-level homes) and higher density, achievable housing options that fit the income profile of the workforce.

To fix this, the homebuilding industry is working  to strengthen its partnership with government to enact targeted reforms, such as:

  • Streamlining permitting and reducing regulatory fees for high-demand, attainable housing types.
  • Reforming restrictive zoning and land use policies that currently discourage the construction of “missing middle” homes: duplexes, townhomes, and multi-family units.

The stability of the regional economy relies on making the dream of homeownership achievable for its workforce. By working together to remove these regulatory and policy barriers, we can ensure that the Indianapolis region builds a sustainable future for all Hoosiers.

Join us to learn more about what can be done to end this policy-driven housing crisis.