High Inflation and Housing Affordability in the United States
by Piero Lorenzo — San José State University (ECON 100W, Fall 2025)
Awarded 114/110 
Between 2021 and 2023, the United States experienced its sharpest affordability crisis in decades — with inflation peaking at 9.1%, mortgage rates surpassing 7%, and home prices rising over 40%.
This paper analyzes how high inflation reduces housing affordability through three main channels: declining real purchasing power, rising construction costs, and elevated borrowing rates.
It also explores the role of monetary policy, generational inequality, and long-term implications for wealth distribution.
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High Inflation and Housing Affordability in the U.S. — by Piero Lorenzo (2,599 words, PDF)
Inflation erodes U.S. housing affordability by simultaneously reducing real incomes, raising construction and material costs, and increasing mortgage rates.
Using data from the Bureau of Labor Statistics, Federal Reserve Economic Data (FRED), and the Urban Institute, this research integrates theory (Quantity Theory of Money, Fisher Effect) with empirical analysis to show how the 2021–2023 inflation surge led to the most severe affordability crisis since the 1980s.
The paper concludes with policy recommendations to expand housing supply, support renters, and improve monetary communication to stabilize expectations.

Highlights
  • CPI peaked at 9.1% in June 2022 — the highest in 40 years
  • Mortgage rates doubled, from 3% to over 7%
  • Median home prices rose 40% in just two years
  • Younger generations delayed homeownership, widening inequality
  • Policy solutions: expand housing supply, support renters, reform zoning


    Author: Piero Lorenzo (October 2025)
    Grade: 114/110 
    Course: ECON 100W — Writing Workshop in Economics
    Instructor’s Note: Permission granted to publish for educational and professional use.

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