A Three-Legged Affordability Agenda!
Just out from the Stanford Institute for Economic Policy Research, by yours truly and the great Neale Mahoney.
My SIEPR (Stanford Institute for Economic Policy Research) colleague Neale Mahoney have a new piece out today on the affordability agenda.1 I’d say “exciting” new piece but that would be self-serving, though that’s how I feel about it.
Our motivation is that affordability is a bit like the weather: Everyone talks about it but nobody does anything about it. In some cases, like groceries, it’s a fundamentally hard problem because, as we point out:
Policy interventions to lower grocery costs are inherently challenging because the government has much less direct involvement in this sector relative to, say, health care, wherein federal and state governments account for about half of spending.
In other cases, like healthcare and childcare, the constraints are often political. Both are essential services, both are straining the heck out of family budgets, but we’ve still failed to take the necessary steps to increase their affordability (listen to Sen. Warren’s extremely compelling take on childcare in this context from this recent interview).
So, we decided to a) write down the economic principles that we thought should be top of mind when crafting policy in this area, b) present a three-legged stool policy framework: enhanced supply, direct subsidies, and competition policy, and c) provide examples of policy ideas worth pursuing in some of the most prominent goods and services in this space, including housing, healthcare, childcare, groceries, and electricity.
Re principles, we start with the obvious—to us, not to the Trumpies: do no harm. We then agree with the Abundance folks that clearing out procedural sludge is a precondition for quicker and cheaper supply expansions. We then make a important distinction between currently supply-constrained and unconstrained markets:
Providing subsidies to consumers is a tempting one-size-fits-all solution to affordability issues. But it works best in settings where supply is elastic enough to accommodate the increased demand. In supply-constrained markets, subsidies primarily result in higher prices with a diminished net-of-subsidy effect on affordability (but a big price tag for the government).
Next, we walk into one of the more controversial policies in this space, price controls. Like all economists, we worry a great deal that while controlling prices sounds great to people struggling with affordability, price signals are still important, and if you jam them, you’ll end up exacerbating your supply shortfall. But we don’t stop there.
…in some markets such as housing, even the most aggressive policies to expand supply operate on a medium-to-long-term horizon, leaving open the question of how to address voters demands for immediate relief.
Faced with this challenge, policymakers have sometimes turned to price controls, such as rental control in housing markets. Such policies carry a significant risk of unintended consequences. By limiting prices that landlords can change in the future, they reduce incentives to build more housing today, thereby working at cross purposes to the affordability objective.
That said, there is at least a conceptual case for targeted, time-limited price controls focused on existing properties with carve outs for renovations (and any new building)…
Too often in this space, economists ignore the time gap between stressed families today and higher-supply-generated affordability in the future (if you hear Bharat Ramamurti talk about affordability, he will correctly and strongly emphasize this point). Even in a future world where we have successfully reduced past-their-sell-by-date building restrictions, this time interval cannot be ignored. This means economic policymakers have a get out of their comfort zone and think about ways to deliver relief in the interim, of which temporary price controls are, in special cases, a viable candidate.
Here are the three legs of the affordability stool:
Enhanced supply: While many regulations have societal benefits that justify their costs, removing procedural sludge that makes it too slow and expensive to build in this country would over time significantly increase the supply and lower the cost of the goods and services that constitute the affordability crisis.
Direct subsidies: In at least three cases — housing, health care and child care — taking down inefficient and friction-inducing barriers will not fully ease affordability constraints. Direct subsidies are needed for low and sometimes middle-income households to afford these goods and services at market rates.
Competition policy: In sectors like health care and food production, among others, insufficient competition pushes up prices and reduces choice, all while generating excess profits for existing companies. Enacting pro-competitive policy can promote affordability, increase choice and make the economy more efficient.
The rest of the piece goes through examples that we fit into these buckets. To be clear, we’re not writing legislation here, just laying out ways to apply the three legs to the solutions to this profound challenge.
Our hopes for the piece are at least twofold. One, as the political season heats up, I guarantee you that every politician will be claiming that she’s going to make life more affordable for squeezed American families. The proper response must be: “Great…how?” We’ve tried to craft a framework within which answers to that question comfortably sit.
But, and here’s our second hope, we’re nowhere near claiming we’ve exhausted the topic. We encourage other policy-minded folks in our field to read and critique what we’ve written and to offer their own ideas to expand affordability. As we put it in our conclusion:
Given the public’s strong demand for policy relief in these and other areas, it is no surprise that politicians and candidates are aggressively elevating affordability issues. As we are likely to see a lot more of this emphasis, our hope is that other economists also take up this mantle and contribute to our understanding of useful — and not so useful — policy interventions to help address this affordability challenge.
Neale (I keep meaning to ask him about that extraneous “e”) directs SIEPR; I’m a mere policy fellow. We received tons of hugely valuable input for the piece from many folks across the wonkosphere. Not to mention great research assistance from Thuy Minh Le and Abigail Sanchez.
You are more than generous to give credit to the “Abundance” agenda, but I prefer Trevor Jackson’s assessment in the New York Review of Books,
https://www.nybooks.com/articles/2025/09/25/how-to-blow-up-a-planet-abundance-klein-thompson/
It is simple (and simple minded) to attribute our problems to “bureaucracy” and “red tape” and offer up the solution of “deregulation.” But it begs the question of which “regulations” you throw over board and which you keep.
Someone once wrote that ‘rules and regulations are the administrative scars of past mistakes’ (or something like that.) Do you tear off the scar tissue and reopen the wound? How much bleeding are you willing to tolerate
For example, It’s a favorite mantra, particularly of Conservatives, to eliminate “waste, fraud, and abuse,” but the more you try to squeeze out of your systems every bit of it, the more congested the process becomes. So, how much are you willing to tolerate, to allow for greater efficiency?
Your focus on “affordability” is an infinitely
more compelling and intellectually accessible agenda. It got Zohran Mamdani to the place he is today.
Abundance by itself will not necessarily result in affordability. Undoubtedly, supply matters, but in the realm of housing, it will not necessarily translate into affordability; certainly not over the short term, but probably not over the long term either. Other financial and regulatory instruments have to be deployed to get to market affordable to all.
The “affordability” agenda gets you to those questions and solutions; “abundance” does not. And folks instantly understand what “affordability” means to their everyday life; “abundance?”
If there were an abundance of super yachts in the world, the ship builders would simply knock down the price. And 99 .9% of the people still couldn’t afford ‘em.
A focus o
Ideas and proposals are important. Let's be realistic, in this atmosphere, with an ignorant fascist in the White House, a supporting political party of spineless bootlickers, and a radical mob of dictator enablers on the SCOTUS there is virtually no chance that any positive policies will be enacted before 2029. On the contrary, the damage will continue to mount.
The current leadership of the Democratic Party is inept and embarrassing. There are only a handful of Democratic senators who are up to the challenge and some of the best are old and may lack credibility with younger Democrats, simply by virtue of their age. I consider Senator Warren to be exceptional, but she's in her seventies. Sanders, is even older, but to his credit he has been a constant opponent of the worst attitudes and practices of the party. Other senators are unreliable, doing something positive one day and following that up with something appalling such as joining with war criminal Bibi Netanyahu for PR photos. John Fetterman must be replaced.
I feel strongly that Schumer and Jeffries should be also be replaced. Nancy Pelosi may have ended the exclusivity of the "Old Boys Club," but there is still too much emphasis on the way things have always have been done. Unfortunately, there are too many Democrats who live in a fantasy world where the goal is moderate, bipartisan deals with Republicans.
In September 2025, the Democratic Party is simply incapable of providing the kind of leadership we need. However, the most serious problem is the electorate. When faced with a choice of a perhaps unexciting Democratic candidate -- Kamala Harris -- and an extraordinarily depraved, incompetent, and dangerous criminal, the voters elected Trump in the most irresponsible display of voter failure in US history. The electorate won't be any smarter in 2026 or 2028. They may have soured on Trump, but they will still send countless Republicans to House and Senate, and the lessons they will have learned, if any, will almost certainly be the wrong ones. Abandoning rationality and reality in 2024, they "believed" Trump would lower prices. The level of ignorance, and yes, stupidity that that required is truly horrifying. Everything anyone needed to know to reject Trump was well known and ignored by 77 million voters. Some of those were in lockstep (or goosestep) with Trump. But others were simply demonstrating that they really aren't competent to vote. There is no reason to believe that will change. For the long term salvation of democracy, it won't be enough in 2026 and 2028 that voters, if given the chance, will turn away from enough Republicans to elect small Democratic House and Senate majorities. What will matter is will they do that for the right reasons, which require a complete reevaluation of what the American right has become. And that will require the expenditure of an amount of time and effort to become well-informed that I don't believe most Americans will be willing to do. They'll still have plenty of time for their favorite sports and teams. They will still rot their brains on social media, but they won't read history or research issues or expand their understanding of economics. If they don't do that, they will be just as easily manipulated as they were in 2024 and the US will continue to fail as it is failing now.