Part 1: Introduction

In June 2022, the aftershocks of the pandemic drove inflation to 9.1 percent after decades in which it had been barely noticeable. Very quickly, the cost of living became the central political issue, and it remained at the top of the national agenda even as inflation fell back to earth. Since winning election in large part on the inflation issue, Donald Trump has set off a new round of it — milder, so far — with misbegotten tariffs and military adventures. But the sense of crisis around the cost of living never went away, even during the two-year period when inflation was at relatively normal levels and after real wages had caught up.¹

The gap between economic fundamentals and the public mood has sparked vigorous debate.² One line of argument is that consumers are responding less to economic realities than political discontents and misleading cues from new media.³ Another is that ordinary Americans remain upset because they just never got used to the higher sticker prices they have been seeing, even though it has now been four years.⁴ Yet another set of analysts argues that our historically high levels of inequality or historically low levels of personal happiness and trust in institutions are to blame. Many in this group are now considering the disturbing possibility that we have entered an era of long-term disconnect between economic fundamentals and public sentiment.⁵

This white paper offers a different framework to make sense of the discontent about the cost of living and chart a way forward. 

To understand why Americans are so frustrated, we need to distinguish between two economic phenomena that we call Fast Affordability — a sudden spike in costs across the economy — and Slow Affordability — a structural rise in the cost of already expensive essentials such as housing, healthcare, and energy. Covid brought on a Fast Affordability crisis the likes of which we had not seen in decades, as nominal prices soared across the board. But Slow Affordability had already been weighing on Americans for many years as housing, healthcare, and childcare ate more out of every paycheck. These costs soared even further when inflation was at its highest. Whatever else may explain Americans’ economic pessimism, Slow Affordability is a real but tractable problem that policymakers would do well to focus on.

To solve the underlying problem of Slow Affordability, we once again make a distinction between the fast and slow types. This time, we borrow the ideas of Daniel Kahneman’s famous study of decision-making and cognition, Thinking, Fast and Slow, to argue that solutions to our structural cost-of-living problem in many cases will run counter to the intuitions and heuristics that our “fast thinking” mind immediately offers up when confronting a problem. Instead, we need to deliberately embrace a “slow thinking” method of diagnosis and prescription that neither the left-populist nor Trump administration playbooks are offering.⁶

The root cause of our Slow Affordability problems is that certain essentials are supply constrained even as demand for them inexorably grows. As our population and incomes grow, we need more housing, energy, healthcare, and so on. When not enough is available, prices rise. But unlike discretionary consumer items, these are not goods that people can easily forgo. Demand keeps rising against a higher and higher price wall.

Addressing supply constraints requires policymakers to operate with patience and prudence, the kind of slow thinking that feels unnatural in a crisis. Part I of this paper explains how various types of supply constraints work and how to solve them. Part II is a playbook for tackling the underlying causes of high prices in housing, healthcare, and energy.

Fast affordability and slow affordability

The “affordability crisis,” as people understand it, is actually the combination of two problems. The first is what we call Fast Affordability. This is basic inflation: a rise in the general price level that comes on unexpectedly fast — say, at 9 percent a year instead of 2 percent. It is a macroeconomic problem that can be brought on by acts of God, such as a pandemic, by the folly of policymakers, or by the genuine difficulty of managing the business cycle.

The second contributor to our present woes is what we call Slow Affordability: a trend in which the prices of particular, critical goods and services consistently rise faster than those of others. For example, the price of a home has gone from about 3.5 times the median household income in the 1990s to about 5 times the median household income in 2024 and higher, sometimes much higher, in 39 metro areas.⁷ According to the Federal Reserve Bank of Atlanta, a median-income household would have to spend 43 percent of its income to own a median-priced home, well above the 30 percent of income that is generally considered affordable.⁸ Since 1999, employer-sponsored family health insurance premiums have risen 342 percent, while mean hourly worker earnings have risen only 119 percent.⁹ This problem is rooted in microeconomics: the way particular markets are set up to enable or block activity.

Just as with the entire economy, prices in these important sectors rose fastest at the peak of our recent period of inflation. As a result, even when inflation was more normal, people still had to spend a higher percentage of their wages on certain essential goods.

This is the structural problem that voters are now focused on when they name affordability as their biggest concern.¹⁰ After the Fast Affordability shock of Covid inflation abated, the Slow Affordability ankle weight of supply-constrained sectors felt heavier than before. Emerging problems that were previously thought of separately had been alchemized with the shock of inflation. What was previously identified as a specific concern about “housing” or “healthcare” was now captured as “inflation,” and then “affordability.”¹¹ When voters cite affordability as their biggest concern, they are thus capturing an active problem, and not merely rehashing past grievances.

Core goods have been growing in price and burden on Americans:

• Housing: A home now costs over 5 times the median household income, making it well out of reach for most Americans.¹² A median-income household would have to spend 43 percent of its income on housing to afford a median-priced home, which would be well above the 30 percent threshold to be considered cost-burdened.¹³ Renting households making under $30,000 only have a median of $210 in income remaining after paying rent and utilities but before taxes and transfers, a decline by 48 percent since 2019.¹⁴
• Healthcare: Healthcare costs are the fastest growing cost relative to workers’ wages. Since 1999, employer-sponsored family health insurance premiums have risen 342 percent and hospital services have risen over 220 percent, while hourly wages have only risen by 119 percent.¹⁵
• Energy: Residential electricity prices have risen from 13.1 cents per kWh in 2020 to 18.6 cents per kWh in July 2026.¹⁶ There were 13.4 million energy disconnections in 2024, and energy arrearages rose 31 percent between December 2023 and June 2025.¹⁷

But though the fast and slow affordability problems are now felt with equal urgency, their causes are fundamentally different. Fast affordability is about the whole economy heating up and igniting inflation; slow affordability is about the cost of a particular good rising faster than the market as a whole. Just as their causes are different, so too are their solutions. The toolkit for reducing Fast Affordability is widely understood at the expert level; it’s simply the playbook for reducing inflation. It requires some combination of reducing government spending, increasing taxes, and raising interest rates, along with clearing and avoiding supply shocks. But the toolkit for addressing an expensive market must examine why prices are rising in that particular market.

We also must distinguish affordability from access. There is a noble tradition of policy aimed at making sure that those at the bottom rung of the ladder have access to essential but unaffordable goods and services, even in a healthy market. These policies are worth continuing, but “affordability” has become a concern in part because people who were not used to feeling squeezed by housing or energy prices are suddenly feeling precarious. There is a distinction between policies that keep supply and demand well-balanced and policies that help people who cannot afford to buy essential goods even in well-balanced markets. Both are critical, but conflating them puts us at risk of reaching for the wrong tools.

This paper focuses on slow affordability — not fast affordability or access. Both managing inflation and ensuring that those with the fewest resources have access to the essentials are important policy goals, but we believe an intervention in the slow affordability debate is especially important for a few reasons:

• As inflation has abated, anger about affordability has shifted from being focused on inflation to being focused on particular goods that have remained expensive.
• The problem of essentials taking up a larger part of people’s income has tractable policy solutions with major implications for people’s ability to flourish.
• The toolkit for addressing slow affordability is more contested than the toolkit for addressing fast affordability, and more solutions are being considered that would be counterproductive.
• Working on slow affordability also has the additional benefit of being growth oriented. While the policies to address fast affordability are about cooling down an overheated economy, the solutions to slow affordability create both economic growth and greater affordability over the long term.

Sure enough, even though much of the coverage of affordability is about high inflation and the sticker prices of eggs and other routine expenses, it’s housing and healthcare that people are most worried about affording. In a January 2026 New York Times poll, 25 percent of respondents said they were most worried about affording housing, followed by 15 percent about medical care, 8 percent most worried about bills, and 8 percent about food. Both housing and healthcare broke down heavily by age: 52 percent of 18–29 year-olds said housing, compared with only 7 percent of people over 65; meanwhile, 26 percent of seniors picked medical care compared with only 5 percent of 18–29-year-olds — reflecting which large costs people actually are exposed to. Only 2 percent said taxes or leisure.

Scarcity, cost disease, and prices

The fundamental dynamic that drives our slow affordability problems is supply constraints. When the economy grows but the supply of a critical good or service isn’t allowed to grow with it because of structural factors, its price will rise faster than inflation. Natural-resource endowments aside, there are two main reasons why supply might be structurally constrained in a market. One is the artificial imposition of scarcity, when laws, regulations, or the actions of a powerful market actor limit the production of a good or service. This can take the form of “rent seeking,” when current providers manipulate the political or regulatory process to limit supply, allowing them to extract additional profit that does not reflect higher quality or productivity. Other times, it happens because policymakers make a deliberate tradeoff between supply and a competing value such as aesthetics, environmental protection, or avoidance of technological risk. When rising demand hits such imposed scarcity, prices rise.¹⁸ In many highly regulated industries, artificially constrained supply isn’t the only problem; additional perverse incentives mean that when the supplier does provide more of the good, it tends to be only the high-cost, Cadillac version. If minimum lot sizes are large, for example, the only way to make homebuilding profitable may be to target the wealthiest buyers.

The second constraint is more subtle: a differential in productivity growth that changes relative prices. When some sectors of the economy do better than others at steadily producing more with less, goods and services from the stagnating sectors wind up costing more. They cannot match price drops in the productive sectors. Their cost basis also rises. This is because workers in the productive sectors can now command higher wages, but stagnating firms must try to keep pace for fear of losing workers to those higher-paying sectors. Society as a whole is better off for these developments, but the stagnating sector suffers from what economists call “cost disease.” The most well-known cause of cost disease is that in some sectors, labor is difficult to replace. When you attend a musical, you’re buying the labor; when you shop for a car, you don’t care whether it was built by humans or robots. Almost by definition, theater companies cannot become more productive.¹⁹

But supply constraints are not inevitable. Rent seeking is a reflection of political power, not economic law. Prudent regulation can discipline market power. When government action itself is the force creating the advantage for a rent seeker, the government can change course. There are also more subtle dynamics that good policy can influence. The technology to expand supply may be within reach but not yet mature, and getting it over the hump requires deliberate innovation and coordination. Even cost disease can be mitigated if we encourage institutional innovation rather than locking in a particular arrangement. Childcare and schooling models have shifted across smaller and larger pooling arrangements in response to both recent and historical trends such as urbanization, women’s entry into the paid workforce, and the rise of remote work.²⁰

Unfortunately, artificial scarcity and cost disease afflict sectors that by their nature chew up a big part of the household budget — namely, essential goods for which demand is inflexible. The result is inexorably rising prices in the things that have the most impact on people’s ability to flourish. And these are many of the sectors that surveys indicate consumers are most worried about.²¹

• Housing: The housing story is primarily one of government-imposed supply constraints. In most places with rising demand for housing, it is illegal to build homes at the density required for supply to keep up with demand.
• Healthcare: Healthcare prices are elevated for a number of reasons. Regulations constrain the opening of new healthcare facilities; there is room for more innovation in drugs and treatments and room for disruption to typical market structures; government payment systems incentivize higher-cost care than necessary; and current regulatory policy has rewarded consolidation and vertical integration, resulting in more market power for large healthcare providers.
• Energy: Increasing energy demand is a structural fact in societies with rising levels of prosperity, but it has become especially acute with the rush to build AI data centers and the Iran War’s shock to global energy supplies. When energy demand goes up, supply has to respond by creating more energy and better, faster ways of getting it to where it’s needed. Transmission has become a major bottleneck: The nation’s power grid is not equipped for new generation or consumption, even as supply and demand go up. The tools, technologies, and opportunities exist to speed up the deployment of new energy technologies. We need to take advantage of them.

The solutions we craft to address the affordability problems in these sectors should take aim at the underlying scarcity and cost disease and the perverse incentives that exacerbate them. The solutions tend to fit into one of the following categories:

• Remove regulatory barriers: If the private sector is prepared to produce more but is prevented from doing so by a regulation whose costs outweigh its benefits, the regulation should be removed. Examples of policies in this category include lifting zoning rules that restrict housing density and such policies as certificate of need laws that block development of new hospitals, clinics, and other care centers.
• Expand the workforce: In some cases, supply lags demand because there aren’t enough workers, even when higher wages should lure them in. A shortage of construction workers, for example, would slow the growth of housing supply even if regulations permitted it. Both more immigration and better workforce training could help.
• Reduce administrative burden: Government inefficiency and high compliance costs encourage businesses to abandon unfinished projects or to pass the cost on to the end user. Unnecessary permitting and zoning reviews, for example, can substantially increase the costs of housing and energy projects or kill them outright.
• Increase market competition: When incumbent providers are shielded from competition, they can maintain high prices without consequence. Policies such as the ban on physician-owned hospitals and right-of-first-refusal laws in energy transmission protect established market participants at the expense of consumers. Removing these artificial protections forces providers to compete on cost and quality, which is how efficient markets are supposed to work to drive prices down.
• Reform misaligned incentives: Some existing government payment structures actively push existing supply toward higher-cost options. When, for example, the government pays more for a doctor’s appointment in one location than the exact same appointment at another location, it creates a financial incentive for the medical provider to steer patients to the expensive option. Identifying and correcting these misalignments would ensure that public dollars stop propping up unnecessarily costly modes of delivery.
• Support early adoption of innovations: Some early-stage technologies that would increase supply are stuck in a trap: they would develop into competitive options if deployed at scale, but they are currently too expensive and untested to attract the customers they need to be deployed at that scale. Ordinarily, a firm might accept early losses to scale up its technology, but in some industries, the benefits of investment would be spread across the entire industry and the costs concentrated on the few firms that make the investment. When this is the case, the government should support the early adoption of these technologies. Subsidies can be a good way to do so, as long as they’re used carefully. If there’s another cause — legal and regulatory barriers, workforce shortages, or supply chain issues, for instance — the subsidy would be useless at best and would push up the price at worst. In addition, subsidies should end when a technology no longer needs them to be competitive. Both solar energy and fracking benefitted from government support and early deployment to become viable energy technologies.

Those are actions that should be taken. The flip side is a set of approaches already underway that in many instances exacerbate supply constraints:

• Direct-demand subsidies: Giving people a tax credit to buy an expensive product does not make it cheaper; the reality is the opposite. By inflating demand against a supply that cannot expand to meet it, such subsidies merely raise costs overall and shift them from individuals to the government. Credits supporting parents to buy childcare are a classic case.²² There may be reasons why this tradeoff is acceptable, but subsidies do not increase “affordability.” New subsidies in large enough quantities can also stimulate the economy, which would raise inflation. Subsidies to support new technologies and to fund additional supply, on the other hand, can work if the regulatory conditions exist for innovation to take place or supply to expand.
• Cheaper financing to spur demand: Making it cheaper to take out a loan in a supply-constrained market would operate similarly to a demand subsidy. By raising households’ ability to pay without addressing the constraints on production, they are largely capitalized into price.
• Price controls: Price controls have two problems. First, they create shortages when the price is set below the break-even point for producers at quantities to meet consumer demand. Second, by artificially containing prices, price controls reduce the incentive for companies to invest in supply, in turn exacerbating supply constraints.
• Tax cuts: Across-the-board tax cuts often give the impression of putting more money in people’s pockets amid rising costs — in fact, they’re often marketed that way — but they can worsen underlying inflation. A tax cut is expansionary fiscal policy: it subsidizes aggregate demand, which increases inflation. At the same time, such cuts do nothing to target the particular sources of high prices of the things such as housing, healthcare, and energy that are taking the most out of Americans’ budgets.
• Tax carveouts: Aside from across-the-board tax cuts, some proposals would carve out benefits for specific categories of income, such as tips or Social Security and tax deductions for high-cost items such as interest on car loans. Such tax carveouts work at cross-purposes to an efficient, progressive income tax code that the public will view as legitimate. When targeted at specific supply-constrained sectors, as with a tax credit for first-time homebuyers, carveouts also constitute an inflationary subsidy.
• Lower interest rates: The impact and effectiveness of interest rates on supply, demand, and the economy generally are highly dependent on the broader economic context. In a period of inflation, lower rates are inflationary. They are, however, politically appealing, which is why President Trump has gone to unprecedented lengths to pressure the Federal Reserve to reduce interest rates.
• Tariffs: Tariffs aimed at spurring growth and raising wages by protecting domestic industries and markets against cheaper imports rarely work as intended. Foreign producers generally do not absorb the cost of higher import duties; instead, they pass them on to consumers, spurring inflation. Manufacturers rarely hire more workers or raise wages as a result of protectionist tariffs, partly because their inputs may also be tariffed and because foreign countries tend to retaliate.

Thinking fast and slow about affordability

It’s clear that there is no shortage of politically appealing ways to address the high prices caused by artificial scarcity or cost disease. It’s just as clear that most of them are counterproductive at best and economically damaging at worst. 

But just as there is a fast version and slow version of affordability, there are fast ways and slow ways to think about each of them. In psychologist Daniel Kahneman’s famous research, detailed in his book Thinking, Fast and Slow, the mind operates in two primary modes. The Fast-Thinking System 1 is automatic and subconscious. It operates by intuition, looking for causal patterns and making rapid associations, assimilating new information to patterns we already recognize. It is generally a reliable guide, allowing us to filter the information constantly coming our way and make quick decisions. Our Slow-Thinking System 2, by contrast, is conscious and deliberate, planning and weighing trade-offs. But System 2 requires sustained cognitive effort that the mind prefers to avoid. As a result, it turns out to be more dependent on the fast pulses emanating from System 1 than we like to admit. System 2 is not independent of System 1, despite what we tell ourselves.

An entire branch of economics has built on the early work of Kahneman and his collaborators to explain how ordinary people make decisions about money. The behavioral economics revolution has used such concepts as loss aversion, present bias, and anchoring to show that we are far from the rational agents assumed by neoclassical models. 

Of course, the perils of Fast Thinking do not disappear when it comes to politics and policy. In fact, a sense of economic crisis strengthens the impulse to let our collective Fast Thinking take control. We have recognized this problem by creating institutional guardrails around our ability to respond to inflation, and one in particular: a central bank, the Federal Reserve. Critically, this innovation does not merely slow down the feedback loop between public opinion and policy; the deliberative and decentralized nature of the Federal Reserve is intended to force careful reflection. 

Today, the acceleration of our affordability problem since Covid has created a sustained sense of crisis. And it is a type of crisis that our institutions are not used to dealing with. The simultaneous shocks of acute inflation and an acceleration of the long-term rise of essential goods in several key sectors are a novel economic situation. And the fact that these problems are felt together as a single burst of elevated prices makes for a novel political one. It is a crisis that will generate intense pressure on policymakers to think fast — that is, to do something, now — but with none of the institutional guardrails that we have with standard inflation.

A theme of Kahneman’s book is that when faced with a hard question, the fast-thinking mind tends to replace it with an easier question. In this case, policymakers should be asking themselves: “Which element of the affordability problem that people are worrying about is based in economic fundamentals and how can we address it?” But that is a hard question to answer, and System 1 may slip in different questions for which the mind can already furnish answers, such as: “What is the biggest economic problem, and how should we fix it now?” This is how we get recommendations for price freezes and tariffs.²³ Whether or not some of these recommendations are appropriate responses to various other problems is open for debate, but as solutions to affordability, they are answering the wrong question.

The challenging political fact of the affordability crisis is that many initiatives intended to address Slow Affordability in the short-term will undermine our ability either to ease cost burdens or to keep inflation down and therefore create another Fast Affordability crisis. This problem — short-term affordability relief tends to be harmful in the long run — is what Neale Mahoney and Bharat Ramamurti called “the affordability conundrum.”

This conundrum can make it tempting to reach for policies that are helpful in the short term — across-the-board tax cuts, low-interest loans, and so forth — but harmful in the long term. We believe in a different approach. Policies that are popular and that even provide short-term relief will not solve the affordability crisis if they spark inflation or tighten supply constraints. Instead, they only ensure that voter demand for change will return with a vengeance. Such short-term, feel-good measures are merely running on a treadmill that goes faster and faster without giving us a chance to catch up. Policymakers who feel pressure to take visible and immediate actions should tout the long-term benefits of the true solutions to slow affordability problems, manage expectations about their timeline, and evaluate other, flashier policies according to a “do-no-harm principle.”

Economic analysts and policymakers have much more information than ordinary people, but they are far from immune to cognitive biases. We do not claim to operate with such immunity ourselves. But we believe the moment calls for careful distinctions about the problems we are trying to solve and specificity about the causal mechanisms at work.

Affordability v. access

This is not a categorical argument against a generous social insurance system or against government spending in general. There are a few cases where government spending can support an affordability agenda, such as:

• Redistribution to the bottom of the ladder: Even when things are at their most affordable, they will still be unaffordable to many of those on the bottom rung. Redistribution, ideally in the form of cash transfers but also as vouchers for specific goods, can ensure that people have access to basic necessities.²⁴
• Smoothing out sudden cost spikes or income dips through social insurance: Some programs provide support or insurance for life stages in which families are often squeezed. For example, a child tax credit can support families facing the new costs of parenting, or unemployment insurance can support people facing the shock of a lost source of income. Both programs urgently need improvement.

These are good policies, but they are not affordability policies. We call them “access” policies. They will not bring down the sticker price of anything, though they will make sure that goods and services, once made affordable, can be accessed by those in need. Critically, they do not work by restricting the supply of any goods or services in the economy, which means they do not interfere with the long-term work of solving slow affordability problems. In fact, access policies and affordability policies are complementary. The right kind of transfers make sure everyone who needs help can access what the economy produces. Meanwhile, alleviating supply constraints to help affordability makes sure that these transfers do not fuel further price spirals when they increase demand for the goods they support.

These kinds of access policies often have a faster effect than policies to alleviate supply constraints. That means they can satisfy some of the desire for short-term solutions. But the access policies we recommend are not designed to help everyone; they’re designed for people who are severely deprived or facing a sudden price or income shock. For the problems that all voters face — the elevated price of essentials such as housing, healthcare, and energy — the best solution is to alleviate the supply constraints that created the problem in the first place.

The rest of this agenda

This agenda will outline solutions to bring affordability to fundamental goods and services that are out of the reach of rising numbers of Americans: housing, healthcare, and energy. It is not a comprehensive roster of solutions or cost areas. It is not intended to be. Rather, it presents examples of solutions with records of success in putting people within reach of those things we all agree are essential to individual, family, community, and national well-being.

Part 2: Playbook

How to use this playbook

The policies in this playbook target structural cost barriers across three critical pillars of middle-class stability: housing, healthcare, and energy.

Every policy proposal has been standardized into a scannable, actionable factsheet. Each policy factsheet  contains the following information:

• Title — A short description of what the policy is.
• Cost Area — Whether this affects housing, healthcare, or energy.
• Affordability Goal — Which specific structural problem in the cost area is this policy trying to solve?
• Mechanism — Which type of policy lever is this pulling? The categories are the same six responses to artificial scarcity and cost disease set out in Part 1:
  • Remove Regulatory Barriers
  • Expand the Workforce
  • Reduce Administrative Burden
  • Increase Market Competition
  • Reform Misaligned Incentives
  • Support Early Adoption of Innovations
• Timescale of Impact — Not everything will bend down the cost curve as quickly. We distinguish between near-term (0–2 years), medium-term (3–5 years), and long-term (6+ years) impact.
• Relative Scale of Affordability Impact — Not every good affordability idea will have the same size of impact. We distinguish between high, medium, and low impact ideas. This does not mean that low impact ideas are not worth doing, but their advocates must set realistic expectations.
• Level of Government — Whether the policy will be implemented by the federal, state, or local government.
• Policy Description — A plain-language explanation of the policy. What would the policy change? Who would implement it?
• How This Improves Affordability — A clear explanation of how this policy would fix the underlying structural failure and improve affordability.
• Trade-offs and Limitations — Why people might oppose the policy, what the trade-offs are, what problems the policy would not solve, and possible implementation challenges.
• Existing Niskanen Work — Other places where we have written about the policy in more depth.

By using these factsheets as blueprints, policymakers can move from chasing rising prices with subsidies and toward building a durable foundation of broad material abundance.

Housing

Housing costs have grown rapidly since 2010, with growth especially fast during the pandemic years. The median home now costs five times the median household income, which is historically high. Forty-nine percent of renters and 23 percent of homeowners are considered “cost burdened,” meaning they spend more than 30 percent of their income on housing. High housing costs are especially severe in economically productive cities, where there are the greatest opportunities. High housing costs are an increasing burden on middle- and low-income families alike. More and more middle-income families are newly cost burdened; the share of renters earning between $45,000 and $74,999 facing a cost burden rose 9.5 percentage points, to 49 percent, between 2019 and 2024. Lower-income households had always faced high rates of cost burden, but for renters earning under $30,000, the median income after paying rent and utilities fell by 48 percent to $210 per month between 2019 and 2024.

The essential problem is that there are not enough units of housing in these areas to support the high demand. It isn’t possible to build enough housing with low-density single-family homes alone, but in most metro areas, multifamily housing construction requires a time-consuming and uncertain local approval process. To see why density restrictions in particular matter, it helps to decompose what housing costs are. Housing costs are a function of three things: the price of the land, the hard costs of construction (materials, labor, etc.), and the soft costs of construction (design review, permits, etc.). 

Land values increase when the property is near amenities such as good jobs or access to recreation. Land values are often highest in the downtown areas of major cities, where demand is high. In high-productivity cities, housing prices are rising faster than construction prices, from which we can infer the squeeze is happening in land. High land prices are a reflection of genuine demand to live in a desirable location, so policy should not aim at suppressing the price of land itself. That means the only way to reduce the land component of the price of housing is to build a unit on less land, requiring smaller and more densely packed lot sizes, or to stack more units on the same plot of land. Mandating excessive use of land makes the land component of housing costs structurally high.

But density restrictions are not the only problem. Even  where dense development is permitted or there is still plenty of room for sprawl, construction costs — both hard and soft — are driving prices up. Throughout the economy, labor productivity has doubled since 1970, but in the construction sector, it has flatlined at best — by  some estimates, it’s down by 30 percent. Research points to inefficient methods and unnecessary regulations as the likely cause. We should help the construction industry become more efficient by creating the conditions for innovations such as improved factory-built housing and modular construction throughout the economy and by creating the conditions for construction practices to operate more efficiently.

Given these features of the housing market, our agenda focuses on two types of solutions:

1. Reform Land Use Restrictions: Relax restrictions on the density of housing so that the land component of housing costs can be spread across more units.
2. Lower Construction Costs: Find ways to make the construction industry more efficient and reduce the costs of inputs to reduce construction costs overall.

Reform land use restrictions

In places where land costs are high, clustering dwellings closer together helps spread these higher land costs across multiple dwellings, keeping costs down. Unfortunately, local land use rules often require excessive amounts of land for each housing unit or prohibit multiple units from being built on the same parcel.

Policy Description 

In 1924, the federal government shaped local zoning codes across the country by printing and distributing the Standard State Zoning Enabling Act. States widely adopted this model legislation, in part to help their localities access early federally backed home loans that offered better terms for tight control of how housing was built and who could occupy it. Over time, this enabled the restrictive zoning paradigm that has led to our housing crisis today.

The federal government should correct these mistakes by developing a new model zoning code for states and localities to adopt. This new code should be significantly more permissive of housing development and increased density where land costs are high. A well-designed code would focus on regulating legitimate nuisances that harm health and quality of life rather than trivial concerns such as building design or unharmful uses. The 21st Century ROAD to Housing Act makes progress to this end — it directs HUD to develop guidance and best practices for state and local governments to update their zoning codes to allow for more dense housing including by eliminating parking minimums, increasing floor area ratios, allowing for larger buildings, eliminating restrictions on Accessory Dwelling Units, streamlining approvals for development proposals, and transit-oriented development. We can increase the likelihood that these model codes are implemented by offering incentives for local jurisdictions to adopt the zoning guidance.

How This Improves Affordability

The core problem with modern American zoning is that it is premised on restricting uses, including residential uses. In practice, cities and planners have used zoning powers to micromanage the allowable density of housing developments, particularly by banning multifamily development, including townhomes and apartments, and requiring large minimum lot sizes. These bans are present on the vast majority of residential land in metropolitan areas across the country and have precipitated the contemporary housing affordability crisis. 

A model zoning code organized primarily around the regulation of nuisances rather than the regulation of use and density would, if adopted by local governments, alleviate our current restrictive development environment. Wide adoption of more uniform zoning regulations would also provide developers with more certainty about what developments would be legal across jurisdictional boundaries. This would provide more opportunities for cost efficiencies from economies of scale, particularly in conjunction with innovations such as factory-built housing that do not create local nuisances but are nonetheless regulated in some zoning codes to maintain neighborhood exclusivity.

Trade-offs and Limitations

Adoption of any model federal code would likely be voluntary. The federal government may want to provide enticements to encourage localities to adopt the model code with minimal revisions. For example, cities that adopt this pro-growth model zoning code should be given priority for grant money designed to support growing communities:  transportation grants, sewer grants, etc.

Existing Niskanen Work

• Evaluating the Reducing Regulatory Barriers to Housing Act
• The ROAD to housing: Tim Scott’s housing bill marks a bipartisan breakthrough
• How housing regulation holds back innovation and what HUD gets right about fixing it

Policy Description 

In many places, local housing scarcity acts as a brake on economic development and shared prosperity. Since local governments are less likely to reap the full benefits of wider economic growth, their zoning laws often restrict the number of people who can live in job- and amenity-rich neighborhoods. This artificially restricts the number of potential employees and customers with access to the benefits of these neighborhoods. States should preempt local housing regulation to allow greater residential density in commercial zones or areas with a high number of jobs to spur economic development and improve equitable access to opportunity. States should do this by requiring local jurisdictions to permit multifamily housing by right – that is, to issue automatic approval as long as it meets standard requirements – and by mandating permissive height, setback, and floor-area-ratio rules in these areas.

How This Improves Affordability

This policy improves affordability in two ways. First, job-rich areas are often those that have the most housing demand and, if housing is restricted, command the highest home prices or rents. Reducing restrictions in these areas would boost supply and reduce rents. Second, allowing housing in job-rich areas and commercial corridors could increase the average proximity of regional residents to jobs and amenities. Increased proximity reduces transportation costs through lower fuel and maintenance expenses and by reducing the number of vehicles a family needs.

Trade-offs and Limitations

The main trade-off is between housing and the commercial base itself. Under by-right approval and permissive floor-area rules, residential projects can outbid commercial bids for land, converting offices and storefronts into apartments and eroding the very proximity to jobs that the policy is meant to create. States can mitigate this by allowing for mixed uses and ground-floor commercial uses and by making boundaries for the areas to be upzoned large enough to accommodate both residential and commercial uses.

Some of the best-located parcels sit along high-traffic corridors, where noise and elevated air pollution are real concerns. But the households who would live there, not city planners, are best placed to weigh these trade-offs. Where these corridors have been opened to development, such as along I-15 in Utah’s Salt Lake Valley, much of the region’s new multifamily supply has located there and helped ease affordability pressure.

Existing Niskanen Work

• An agenda for abundant housing
• Public Comment: HUD should continue affirmatively furthering fair housing
• Op-Ed: Transportation policy is incomplete without housing

Policy Description 

Zoning laws in many jurisdictions impose a binding constraint on the construction of new housing near subways, light rail, bus stations and other mass transit infrastructure, where the transportation networks to support additional density are already in place. Local governments should increase the number of dwelling units allowed per acre, remove parking requirements, allow taller buildings, and legalize multifamily dwellings in places well served by transit. States could preempt local zoning ordinances to the same ends. The federal government could tie transit infrastructure funding to better zoning and permitting rules.

How This Improves Affordability

Dense development around transit infrastructure can shorten long and costly commutes  or replace them entirely with public transit. Such neighborhoods tend to attract jobs and amenities, so that walking becomes another option. And the higher density of housing itself works to reduce home prices across the region.

Trade-offs and Limitations

This policy works best at reducing transportation costs when the transit stations themselves are in high-amenity areas. While this is generally the case, particularly in older systems, some newer systems may have less ideally sited stations. Federal and state incentives or preemption may also generate opposition from nearby residents fearful that associated zoning changes will follow. Taken too far, zoning for housing could displace commercial or office uses. The ideal outcome is a neighborhood with a mix of housing, commercial, and office uses near transit. 

Existing Niskanen Work

• The three YIMBY bills: How Congress can mitigate underproduction
• Build more housing near transit 2.0
• Making federal transit dollars work: Two reforms for better value
• Op-Ed: Transportation policy is incomplete without housing

Lower construction costs

High building costs, both hard and soft, limit the number of projects that can be built profitably, and make it harder to build units unlocked by other hard-won reforms. Residential construction productivity has been stagnant for generations while the rest of the U.S. industrial economy has seen substantial productivity growth. By allowing more efficient construction methods, encouraging traditional missing middle building designs, and undertaking near-term fixes to the shortage of skilled construction workers, we can get more housing built to add supply and replace obsolete buildings.

Policy Description 

In theory, the major parts of a home can be built in a factory, where standardization and volume could drive down price. The chief barrier is that bespoke local building codes require too many permutations to make the practice economical. When a factory needs to customize every unit it produces, it loses its advantage compared with site builders but retains the disadvantages of high fixed-overhead costs, plus shipping the finished product in its assembled form. Standardized building codes are the solution.

How This Improves Affordability

The HUD code creates a particular type of factory-built housing called “manufactured homes.” Homes built to this exact specification do not need to comply with local regulations, which the HUD code preempts. Such homes can be over 30 percent more cost-efficient to build than equivalent site-built homes. Creating the same regulatory standardizations for other types of factory-built housing such as modular homes, panelized homes, or homes with prefabricated components would lower costs by letting construction companies efficiently produce more of the home off-site.

Trade-offs and Limitations

Companies that build houses in factories have one primary disadvantage compared with site building companies: Factories have far higher overhead costs, as they must finance capital-intensive equipment and maintain their facilities whether they have orders to fill that capacity or not. Site builders, particularly local firms, have few assets; they tend to rent heavy equipment rather than carrying its costs between jobs.

This means factory homebuilders are more susceptible to downturns than other builders. Moreover, the capital-intensive nature of the business makes it much harder to stand up new firms when demand is high. This means that a heavy reliance on factory building could make the recovery from a future housing downturn even slower than it was after the Great Recession. That said, a prolonged downturn in the factory-built housing market is unlikely given the national housing shortage and a tight construction labor market pushing builders toward less labor-intensive options.

Modern factory-built homes still suffer from a social stigma that came from the reputation of older mobile homes as a poor-quality housing product for the rural poor. But today they are often indistinguishable from equivalent-sized site-built homes in quality of construction and finishes. Buyers can specify the same high end finishes and appliances available in site-built homes, but because the rest of the structure is more efficient to build, they still save time and money. Over time, as more modern factory-built homes are delivered, this stigma could erode and the sector would be able to stand on its own merits.

Existing Niskanen Work

• New manufactured housing rules: another step toward abundant housing
• Manufactured housing: the ugly duckling of affordable housing
• Statement for the Record before the U.S. Senate, Committee on Banking, Housing, and Urban Affairs, Subcommittee on Housing, Transportation, and Community Development
• Statement for the record before the U.S. Financial Services Subcommittee on Housing and Flood Insurance on “Housing Affordability: Governmental Barriers and Market-Based Solutions”
• Two big developments in manufactured housing reform: New rules, new bill
• Statement for the record before the Senate Committee on Banking, Housing, and Urban Affairs

Policy Description 

Localities can spare developers from having to review bespoke designs by providing an open-source catalog of preapproved plans that can be built by right. A locality typically develops a plan catalog to match common building types and designs already in the community. This allows the community to encourage the building types and aesthetics that residents prefer not by vetoing individual projects, but by making it easier to build those they like.

About 40 cities throughout the country use preapproved building plans of some kind, and they are showing positive results. Builders in South Bend, Indiana, have used a preapproved plan catalog introduced in 2022 to build 79 housing units in 64 buildings through the end of 2025. The catalog’s designs range from Accessory Dwelling Units and detached homes up to a six-unit apartment building. 

How This Improves Affordability

Soft costs can make up 20 percent of the cost to build a new home. These costs include design, engineering, permitting, and anything else not directly related to construction. Preapproved plans reduce these soft costs by providing finished plans at no or nominal cost. They also produce indirect savings by shrinking the permitting timeline and eliminating uncertainty for projects subject to discretionary review. In many cities, small-scale or infill developments do not generate enough revenue to offset high soft costs. Preapproved building plans can help these marginal projects pencil out financially. Preapproved building plans can also be implemented at very low cost to a municipality; it only cost South Bend $115,000 to design its first set of plans.

Trade-offs and Limitations

Building codes and zoning rules are typically developed at the local level, so a preapproved plan catalog will need to fit the local regulatory environment. Generic designs might not be allowed under local zoning rules or lot sizes, or they could be too conservative and leave buildable space on the table compared with custom plans, making them less attractive. 

Existing Niskanen Work

• One year later: pre-approved home plans for South Bend infill
• With preapproved building plans, local, state, and federal policymakers take aim at soft costs
• Niskanen Center statement on United States Senate passage of the 21st Century ROAD to Housing Act

Policy Description 

To minimize risk from fires, typical multifamily construction rules require fireproof concrete and steel construction for large buildings, with automatic sprinklers and multiple exit stairs accessible from each apartment. 

Unfortunately, this arrangement makes large multifamily construction much more expensive than smaller multifamily buildings or single-family homes. In particular, the requirement that multifamily buildings have two fire exit stairs restricts these buildings to large sites to  accommodate their inefficient layouts, even though single-stair buildings have a strong fire safety record.

Reforming building codes to allow more multifamily buildings to use single-stair construction would allow more efficient building designs that reduce costs and allow better use of small sites without sacrificing safety. The 21st Century ROAD to Housing Act includes a provision requiring HUD to issue technical guidance on and model regulatory language for allowing single-stair building layouts up to six stories, which would enable states and localities to more easily adopt this reform.

How This Improves Affordability

In many places, land costs are too high for detached single- family homes and too low to justify high-rise apartment buildings, or parcels are too small to fit a large building. This middle ground is best served by midsize buildings. 

These midsized buildings work best when the greatest share of building space is devoted to housing rather than stairs and hallways. Single-stair designs unlock this efficiency by dispensing with additional stairways and elevator cores, and the hallways that connect them. The result is additional living space for the same building size and greater unit layout flexibility, including the possibility for more multibedroom units with windows in all rooms, even if those rooms are on opposite sides of the building, since the building is not bisected by a long hallway.

Trade-offs and Limitations

Fire professionals and the International Association of Fire Fighters oppose single-stair reforms on safety grounds but lack meaningful evidence to back up their claims. Despite this opposition, state and local officials increasingly support single-stair code reforms.

As additional single-stair buildings are completed and occupied in more jurisdictions, their reputations for safe operation and practical floorplans could broaden support. Until then, policymakers at all levels of government will have to counter opponents by building that body of evidence in favor of this efficient building design. 

Existing Niskanen Work

• Op-ed: Exit strategy: the case for single-stair egress
• Understanding single-stair reform efforts across the United States
• Building code reform moves forward in Virginia

Policy Description 

The construction industry faces a severe labor shortage that more immigrant workers could help alleviate while we undertake the long-term work of rebuilding our domestic workforce system. Congress should reform the existing H-2B temporary visa program to ensure builders can legally hire immigrants. The H-2B is a temporary visa for nonagricultural workers with an annual cap set by Congress. As the population of work-authorized parole and Temporary Protected Status holders dwindles due to regulatory changes and increased enforcement, Congress should make the number of H-2B workers who will be allowed in a given year more flexible in response to domestic needs and more formulaic, rather than relying on supplemental allocations. Congress could also implement standardized procedures for exempting some returning workers from the cap to maximize efficiency and prioritize workers who have demonstrated previous compliance with the visa terms.

Aside from FY2020, the Department of Homeland Security has issued supplemental visas every year since FY2017, but the discretionary nature of these allocations has made it difficult for many employers to rely on the program as a predictable and steady source of labor. Tying program limits to specific labor market indicators could support business continuity and predictability and could meaningfully improve employer access to qualified construction workers in the short term. 

How This Improves Affordability

Without an adequate workforce, construction projects may be delayed or canceled. In 2025, the Home Builders Institute estimated that the labor shortage resulted in more than $8.1 billion in lost single-family home building, or the equivalent of 19,000 homes. By lengthening construction timelines, it also cost the industry more than $2.6 billion. In conjunction with other efforts that support the long-term growth of a domestic labor pipeline, congressional visa reform could help alleviate some of the more immediate labor needs of the construction industry while still protecting American workers. 

Trade-offs and Limitations

Even with more H-2B workers available, employers who may have relied on Temporary Protected Status holders, parolees, or even unauthorized workers in recent years will have to be willing and able to navigate the complexities of employment-based immigration, including multiple applications, fees, and government agencies. But the proposed reform would ensure that the availability of qualified labor alone would not be as much of an impediment. 

Existing Niskanen Work

• Immigration beyond the extremes: a blueprint that actually works
• How immigration enforcement is hitting businesses

Healthcare

Healthcare costs are the fastest-growing burden on American workers’ budgets. Employer-sponsored family health insurance premiums have risen 342 percent since 1999, and hospital service prices rose over 220 percent between 2000 and 2022 — while over the same quarter century, mean worker earnings grew only 119 percent. And this growth in healthcare costs, in particular hospital services, has outpaced inflation for decades. 

Several reinforcing dynamics keep healthcare prices structurally elevated. First, a wave of consolidation has concentrated market power in the hands of large hospital systems, which gives them leverage to demand higher reimbursement rates from insurers. These higher prices flow through to patients in the form of higher premiums and out-of-pocket costs and reduced wages as employers spend more to subsidize healthcare. Second, archaic Medicare policies actively incentivize this behavior by reimbursing the same services at higher rates for hospital-owned clinics. The original purpose was to account for the higher overhead costs of running a hospital, but hospitals have exploited the policy to acquire independent practices and bill identical services at higher rates. Providers outside the hospital system must run lean to survive, and they deliver care at a fraction of the cost. Third, regulatory barriers, in the form of certificate-of-need laws and restrictions on physician-owned hospitals, limit the entry of lower-cost competitors. Finally, patent strategies that delay generic drugs from entering the market keep drug prices far higher than they would be in competitive markets.

The policies in this section target each of these structural failures directly. Rather than subsidizing demand or capping prices, these policies focus on improving the market structures by confronting prior policy failures that have distorted provider incentives and kept prices unnecessarily high. We can make healthcare more affordable by expanding supply, restoring competition, and aligning payment incentives with actual costs. Our approach is based  on three principles:

1. Increase market competition to lower the prices of treatments and drugs: To lower the elevated prices that large hospital systems and pharmaceutical companies charge, we should change the policies that limit market competition.
2. Increase access to lower-cost healthcare delivery models: In some cases, patients can get the treatment they need outside of large hospital systems. We should help ensure the financial viability of these lower-cost, more efficient alternatives.
3. Reform incentives in federal healthcare policy: Government healthcare policy, particularly when it is directly involved in spending, should encourage lower costs rather than limit people’s choices to only high-cost options.

Increase market competition to lower the prices of treatments and drugs

Incumbent medical providers and drug manufacturers have used regulatory and legal tools to insulate themselves from competition, keeping prices higher than a functioning market would support. Certificate-of-need laws give hospital systems veto power over new entrants. Restrictions on physician-owned hospitals prevent proven lower-cost models from scaling. Patent thickets allow drug manufacturers to delay generic competition for years beyond their intended exclusivity period. The policies in this section would dismantle these protections and restore the competitive pressure that keeps prices down.

Policy Description 

Certificate of need (CON) laws require providers to obtain approval to build or expand hospital facilities or acquire new equipment. In most states, the approval process allows competing hospital systems to challenge the applications of new market entrants, effectively giving incumbents a “competitor’s veto” over new hospital construction and expansion. Thirty-five states and the District of Columbia still maintain CON programs, even though the federal government repealed its own CON mandate in 1986 and the Justice Department and Federal Trade Commission jointly recommended state repeal in 2016.

How This Improves Affordability

By restricting the supply of healthcare facilities and insulating incumbents from competition, CON laws keep prices — and premiums — artificially high. CON laws entrench the market position of incumbent hospitals, increasing the consolidation of healthcare markets and paving the way for hospital monopolies. CON laws have made it difficult for smaller facilities offering lower-cost services, such as ambulatory surgical centers, to open. Freeing entry for such competitors would give patients access to high-quality, lower-cost alternatives for many routine procedures.

CON states have 30 percent fewer hospitals per 100,000 residents and around 99 fewer hospital beds per 100,000 people. Following CON repeal in five states, researchers found a substantial increase in hospitals in both urban and rural areas, indicating that supply responds when barriers are removed, putting downward pressure on prices for patients.

Trade-offs and Limitations

Some proponents still make the case for CON laws using their original rationale. Some are concerned that removing CON restrictions could lead to higher costs via induced demand. When providers invest in high-cost imaging or surgical infrastructure, they have a financial incentive to increase use of such equipment to recoup their costs, potentially driving up total healthcare spending regardless of clinical necessity. The evidence that this occurs is weak and inconsistent, and most research suggests CON laws have failed to contain costs even on their own terms.

CON repeal alone would not fix the underlying payment incentives that drive consolidation. If site-based payment differentials remain in place, new entrants may simply get acquired by existing hospital systems seeking to capture higher reimbursement rates. CON repeal is most effective as part of a broader supply-side reform agenda that also addresses the payment distortions that reward consolidation over competition.

Existing Niskanen Work

• The missing half of healthcare choice
• Niskanen Center Comments on Anticompetitive Laws and Regulations in Energy, Healthcare, and Housing
• Healthcare abundance: an agenda to strengthen healthcare supply

Policy Description 

The 2010 Affordable Care Act included a provision that banned both the creation of new physician-owned hospitals (POHs) and the expansion of existing ones. The ban was introduced amid concerns about self-referral and overutilization, but its primary effect has been to restrict market entry for a category of provider that consistently delivers lower-cost care. Existing POHs were allowed to continue operating, but they were not permitted to expand, a restriction that limited their competitive impact in markets increasingly dominated by large, vertically integrated hospital systems. Congress should lift the ban and allow for both the expansion of current POHs and the formation of new ones.

How This Improves Affordability

Large, vertically integrated hospital systems have accumulated significant bargaining leverage over insurers, allowing them to negotiate higher reimbursement rates. Facing these higher costs themselves, insurers pass them through to patients as higher premiums and out-of-pocket costs. POHs introduce competition into those negotiations. Because they are independently owned and operated by physicians rather than large health systems, they have a structural incentive to compete on price and quality rather than on market power.

POHs serve as a counterbalance to consolidated hospital systems. A 2023 JAMA Network Open study found that physician-owned hospitals had prices negotiated between hospitals and insurers roughly 18 percent lower than other hospitals in the same market for eight common shoppable outpatient services. Research from the Mercatus Center found that POHs offer higher-quality care at the same or lower cost compared with non-POHs. 

The commercial price effect would be the most direct affordability benefit of lifting the ban. The 18 percent lower cost for outpatient service reflects what happens when patients have a genuine lower-cost alternative in the same market. Lifting the ban would allow more patients to access that alternative and put downward pressure on prices at incumbent hospital systems as well.

Trade-offs and Limitations

The original rationale for the ban was concern over physician self-referral: When doctors own a stake in a hospital, they have a financial incentive to refer patients to their own facilities, potentially driving up utilization and total spending even if per-unit prices are lower. Policymakers should consider pairing POH reform with strengthened anti-kickback and self-referral disclosure requirements to ensure that ownership stakes do not distort clinical decision-making at patients’ expense.

A related concern is that POHs may have less bargaining leverage with insurers than large integrated systems, which could limit their ability to participate in certain insurance networks and reduce their accessibility for some patients. As a result, lifting the ban would have the greatest impact in markets with robust insurer competition to enable POHs to effectively negotiate their contracts with insurers.

Existing Niskanen Work

• Healthcare abundance: an agenda to strengthen healthcare supply
• The missing half of healthcare choice
  Why healthcare should unite abundance and antitrust

Policy Description 

Patent law gives drug manufacturers a temporary period of market exclusivity in exchange for publicly disclosing, including to potential competitors, how a drug works. The prospect of charging premium prices for a limited time is also intended to encourage drug makers to invest in developing new treatments. Once that exclusivity expires, generic manufacturers can enter the market and afford to provide a nearly identical version at a fraction of the price. But brand-name drug makers have long used “patent thickets” to extend their market exclusivity well beyond what patent law intended. A patent thicket occurs when a manufacturer builds a portfolio of overlapping patents around an existing drug, not to protect genuine innovation but to force would-be generic and biosimilar competitors into prolonged and expensive litigation over dozens of patents simultaneously. 

The tactic works: Continuation patent applications, which allow manufacturers to file new claims on top of their initial application and maintain protection for longer, increased by 200 percent between 2000 and 2015 per new drug approval. The 10 best-selling drugs in the United States in 2021 averaged 74 patents per drug, with 66 percent filed after FDA approval was granted.

Several legislative and regulatory paths exist to address this problem. The Affordable Prescriptions for Patients Act (S.1041) would cap at 20 the number of patents a drug maker can assert against a competing manufacturer in litigation in the market for biologics, which are drugs derived from living cells. This bill targets the oldest and most commonly abused patent types. The ETHIC Act (H.R.3269 / S.2276) more directly targets the root of patent thickets by limiting brand manufacturers to asserting one patent per patent group in infringement actions. This bill has a broader application, implicating both biologics and small-molecule drugs.

How This Improves Affordability

Generic drugs are priced at an 80 percent to 85 percent discount relative to their brand-name counterparts. Every month of delayed generic entry is a month in which patients and federal programs pay brand-name prices for drugs that could be available far more cheaply.

The Congressional Budget Office estimated that the patent thicket reforms in the previous Congress’s version of The Affordable Prescriptions for Patients Act, would reduce spending by $1.5 billion over 10 years and lower the price of affected products by 20 percent on average. The ETHIC Act, which covers a broader set of drugs and more directly dismantles the thicket structure, has the potential for larger savings. Reducing this key barrier to entry will grant patients access to potentially life-saving medication at faster rates and at a lower cost. 

Trade-offs and Limitations

The pharmaceutical industry argues that robust patent portfolios are necessary to recoup the high costs of drug development, and that limiting patent assertion rights could reduce incentives for future innovation. Both S.1041 and the ETHIC Act attempt to address this concern by targeting only the specific types of patents most associated with thicketing — those that represent obvious variations on prior inventions rather than genuine improvements — while leaving intact protections for genuine innovations. The ETHIC Act in particular is structured to reward real innovation: The more patentably distinct improvements a manufacturer makes to a drug, the more patents it can assert. 

Existing Niskanen Work

• Bipartisan momentum on drug-patent reform could clear a faster path for affordable generics
• Reforms targeting “patent thickets” would speed up the arrival of lower-cost drugs
• Public comment: Terminal disclaimer practice to obviate nonstatutory double patenting

Increase access to lower-cost healthcare

Because healthcare prices vary significantly across facilities, even in the same city, high healthcare costs are in large part a function of where care is delivered. Large hospital systems generally charge more for the same care than independent clinics. Telehealth services require less overhead than services performed in a brick-and-mortar clinic. Expanding patient access to these lower-cost settings is one of the most direct ways to bring healthcare prices down. 

Policy Description 

The pandemic reshaped healthcare delivery by expanding access to telehealth. Congress created new flexibility for Medicare beneficiaries, allowing reimbursement for services delivered at home, but the policy remains temporary. Without congressional action, that flexibility is set to end in December 2027. Extending it could make sure that Medicare patients continue to have access to telehealth services.

Making Medicare’s telehealth flexibility permanent has broader implications. Private payers and providers need regulatory certainty to invest in telehealth infrastructure. Medicare is a large enough insurer that a permanent statutory change to maintain telehealth eligibility would ensure that it remains a part of the care landscape. 

It would cost money to permanently cover telehealth services, but it can be funded, at least in part, by fixing another market distortion: payment parity between telehealth and in-person visits. Telehealth payment parity in Medicare reimburses telehealth services at rates equal to in-person visits, even though they are cheaper to deliver. That inflated reimbursement crowds out the savings that make telehealth attractive in the first place. Removing it would create fiscal space to fund permanent coverage while aligning payments more closely with actual costs.

How This Improves Affordability

For many patients, particularly those in rural areas, the highest barriers to care are logistical: transportation, time off work, distance from providers. Telehealth access removes those barriers.

Telehealth can also be a cheaper alternative to in-person care. The care itself is cheaper to deliver because it requires less overhead expenses, and it can reduce costs beyond the price of the visit itself. 

By reimbursing telehealth at the same rate as in-person visits, we forgo the cost savings. By changing funding to reflect the lower cost of delivery, we save money on each individual telehealth visit. And by giving patients the option to use telehealth when it fits their needs, we shift patients to a lower-cost option without reducing the quality of their care.

Trade-offs and Limitations

Pairing a popular provision (permanent telehealth) with a less popular one (a payment cut) could invite provider lobbying that delays or stalls the legislative package. It is also difficult to predict how providers would respond to the removal of payment parity: utilization patterns may shift as providers adjust billing and scheduling practices in response to the new rates, making the size and timing of recovered savings uncertain.

Existing Niskanen Work

• Addressing concerns about permanent telehealth expansion in Medicare
• Statement for the record before the House Budget Committee

Policy Description 

Primary care in the United States is in decline. Between 2021 and 2022, primary care visits fell by 6 percent, continuing a downward trend since 2008. More expensive emergency departments are increasingly filling the gap. The problem is acute for Medicaid enrollees, who face greater obstacles accessing primary care than patients with private insurance and use emergency departments at higher rates than any other insured population.

The Medicaid Primary Care Improvement Act would address this gap by allowing state Medicaid programs to contract directly with direct primary care (DPC) practices. DPC is a membership-based model in which patients — or in this case, Medicaid — pay a flat monthly fee, typically around $75, for comprehensive primary care including walk-in and same-day appointments. Because DPC practices opt out of traditional insurance billing, physicians shed administrative overhead and can devote significantly more time to each patient — 98 percent of DPC practices offer same-day appointments, and visit lengths run two to three times longer than at conventional offices. Under current law, states must navigate the Medicaid waiver process to contract with DPC clinics, a burdensome path that only Michigan has completed. The bill would establish in statute that states may enter these arrangements directly, without a waiver.

How This Improves Affordability

Medicaid enrollees who lack reliable primary care frequently defer treatment until conditions become acute, resulting in expensive emergency department visits and avoidable hospitalizations. Research shows that DPC patients experience meaningful reductions in overall claims costs and emergency department usage — savings that flow directly to state and federal taxpayers. Beyond program savings, allowing Medicaid to contract with DPC practices would expand the patient base available to DPC clinics, supporting their growth and introducing greater competition with traditional fee-for-service practices. That would put downward pressure on primary care costs for non-Medicaid patients as well.

Trade-offs and Limitations

DPC clinics are not evenly distributed across the country, and they are especially scarce in rural and low-income areas. But by making Medicaid contracting broadly available, the Primary Care Improvement Act would create a financial incentive for DPC practices to expand into underserved markets. 

In addition, the existing evidence on DPC cost savings comes largely from commercially insured populations. It is also plausible that DPC practices attract healthier, lower-complexity patients, and observed savings may partly reflect that patient mix. Medicaid enrollees tend to have higher rates of chronic conditions than typical DPC members, and it is still unclear how findings may be different for Medicaid patients. This is why pilot programs to test the model are important. 

Existing Niskanen Work

• Interview: Should Medicaid pay for Direct Primary Care memberships?
• The Hill: One bipartisan solution can revolutionize how Medicaid patients get primary care
• Innovations in care delivery can improve access to primary care for Medicaid beneficiaries

Reform incentives in federal healthcare policy

The federal government is the largest payer in the American healthcare system. It often intervenes in commercial payment as well, shaping the entire market, and it does not always do so in a way that lowers costs. When Medicare pays hospital-owned clinics more than independent clinics for an identical service, it creates a financial incentive for hospitals to acquire independent practices and bill identical services at higher facility rates. When Congress passes laws meant to protect patients, getting the payment incentives wrong can turn a well-intentioned consumer protection program into a mechanism that raises costs for everyone. Correcting these misaligned incentives would reduce what the government pays, helping to sustain the long-term viability of an important social insurance program affecting practically every family and community in the country, and lowering costs for patients.

Policy Description 

In 2020, Congress passed the No Surprises Act (NSA) to shield patients from unexpected medical bills. These unexpected medical bills came when patients visited a hospital that was in their insurance network but were treated by out-of-network physicians they could not choose — often physicians treating them for medical emergencies. Since insurance companies do not have a negotiated rate for out-of-network services, there were often big gaps between what an insurance company was willing to pay and what the medical provider charged. Patients were responsible for paying the difference. Because patients had little ability to avoid these physicians, the staffing groups that contract with hospitals could stay out-of-network to command the higher rate.

Under the NSA, when an out-of-network provider and an insurer cannot agree on a payment rate, either party can initiate a federal independent dispute resolution (IDR) process, in which a certified arbitrator chooses between the payment demanded by the provider and the payment offer from the insurer. This means patients no longer receive the bill. But the IDR process itself has become a significant and growing source of healthcare waste, and this waste is passed onto patients in the form of higher premiums.

In 2025 alone, Centers for Medicare and Medicaid Services (CMS), the agency managing the process, received over 2.5 million new disputes, a nearly 75 percent increase in volume from 2024 and nearly 150 times the originally predicted annual caseload. Payouts under the No Surprises Act reached $14.85 billion in 2025, an estimated six times what would have been paid under typical in-network rates. Total administrative costs of the program in 2025 more than doubled from 2024, from $784 million to $1.85 billion. Providers continue to win the vast majority of disputes, peaking at 88 percent in the first half of 2025 before falling slightly. The process has become a revenue strategy, particularly for large, private equity-backed provider groups, which dominate the ranks of top initiators of arbitration claims.

The original NSA tried to constrain awards by suggesting that decisions be based on a reference point called the Qualifying Payment Amount (QPA), which is set at the typical rate insurers pay for each service; however, Congress did not specify how arbitrators should weigh it against other considerations and a federal court struck down a rule that attempted to make the QPA the primary consideration. Because the QPA is not meaningfully binding, median winning offers are running consistently at 400 percent of the QPA for each service, largely driven by high median offers from providers.

The solution is straightforward: Replace standardless arbitration with a defined payment benchmark. Congress should anchor out-of-network payments to a sensible, market-based rate such as a more refined QPA. A statutory benchmark would eliminate the arbitrage incentive, dramatically reduce administrative overhead, and most importantly, restore the original intent of the No Surprises Act to reduce costs for patients. 

How This Improves Affordability

Inflated out-of-network payments through the No Surprises Act IDR process are ultimately passed on to consumers through higher insurance premiums and increased cost-sharing. CMS data directly shows arbitrators are awarding more than what was previously paid for the same services out-of-network. Payments won by a provider through arbitration above previous allowable out-of-network rates will likely be extracted from patients and employers. Benchmarking out-of-network payments to a defined rate would prevent that extraction and ultimately reduce the premium cost burden on employers and patients. 

Trade-offs and Limitations

A transition to benchmarked rates would face strong opposition from organized medicine and other stakeholders that have come to depend on IDR as a revenue stream. Legislative action would require a difficult reconciliation with these industry players. The difficulty would center on the metric used to benchmark rates. Providers have argued that the QPA is deflated, so policymakers would likely need to settle on a rate above the raw QPA to build a coalition broad enough to pass reform. Even with a higher-than-QPA benchmark, patients would still see affordability benefits due to the elimination of excessively high awards. 

Existing Niskanen Work

• New data, same problems: No Surprises Act arbitration abuse persists
• New data shows No Surprises Act arbitration is growing healthcare waste
• The No Surprises Act is protecting patients, but not containing health care costs
• Statement for the record before the House Budget Committee

Policy Description 

Medicare currently reimburses hospital outpatient departments (HOPDs) two to four times as much as independent physician offices for identical services. This payment disparity has no clinical basis and reflects differences in facility type rather than differences in care. Site-neutral payment reform would end this practice.

Between 2017 and 2022, commercial prices for common services at hospital outpatient departments grew 13 times faster than at independent physician offices. Medicare’s payment policy contributes directly to this disparity by creating financial incentives for hospitals to acquire independent practices and bill identical services at higher facility rates. Site-neutral reform would remove that incentive. It would also put downward pressure on private insurance rates by removing the Medicare rates these companies use as benchmarks.

How This Improves Affordability

Site-neutral payments would lower healthcare costs for Medicare enrollees by addressing  cost-sharing and premiums. 

Medicare beneficiaries are typically responsible for 20 percent of the Medicare-approved amount for a service. Therefore, when Medicare reimburses at lower rates, part of those savings are passed on to patients in the form of lower out-of-pocket costs. Recent Niskanen Center research estimates that certain cancer patients would save over $1,000 in out-of-pocket costs in their first year of treatment. Research estimates $36.7 billion in aggregate cost-sharing savings over 10 years, alongside $43 billion to $67 billion in Medicare Part B premium reductions as federal program savings flow through to beneficiaries. These translate to average annual savings of $114 per beneficiary, with more significant yearly savings for beneficiaries who use more services. 

Trade-offs and Limitations

A common objection to a policy of site-neutral payments is that it would result in revenue reductions that rural hospitals struggling for survival cannot afford. Here, it matters whether the change affects only off-campus clinics that a health system has nonetheless classified as “hospital” facilities or extends to clinics that are truly contained within a larger hospital campus. For off-campus reforms, the concerns are unwarranted, because rural hospitals are much less likely to operate such clinics. Only 7 percent of Medicare’s total off-campus outpatient spending occurs in rural areas, and just 0.1 percent of rural outpatient spending would be affected by reform.

However, a more comprehensive policy extending site neutrality to on-campus clinics would have some impact on rural facilities. Policymakers pursuing full site neutrality should pair it with a reinvestment mechanism directing a share of federal savings to rural and safety-net hospitals,  an approach already included in a bipartisan, Niskanen-supported framework proposed by Senators Bill Cassidy (R–La.) and Maggie Hassan (D–N.H.). 

The real trade-off is for large urban and suburban hospital systems, which stand to lose revenue in all versions of site neutrality. Hospitals may respond by shifting utilization toward services not covered by reform or pursuing other strategies to recoup lost revenue. How hospitals respond will depend on the scope of any enacted policy and should be monitored closely following implementation.

Existing Niskanen Work

• Estimating Out-of-Pocket Savings From Medicare Site-Neutral Payments on Colon, Lung, Ovarian, and Prostate Cancer Patients
• How site-neutral payment policies can save money for cancer patients and the chronically ill
• Addressing Medicare spending and hospital consolidation with site-neutral payments

Policy Description 

Privately insured and uninsured patients face their own site-specific charges. Hospitals charge facility fees — separate charges on top of a provider’s professional fee —  whenever a patient is treated at a facility designated as a hospital outpatient department (HOPD). These fees were originally designed to offset the overhead costs of maintaining hospital infrastructure, but they are increasingly applied to routine outpatient services at off-campus clinics that have little connection to a hospital campus.

The costs can be substantial: A routine primary care visit costs nearly 90 percent more in a “hospital outpatient” setting than in a physician office, with the facility fee accounting for roughly $100 of that difference on average. Patients often have no way of knowing in advance that a clinic is licensed as part of a hospital and that they will face a separate facility charge on top of the standard physician bill. Nine states have enacted laws prohibiting facility fees for specified services or off-campus settings where hospital-level overhead cannot be justified.

How This Improves Affordability

Facility fees add hundreds of dollars to patients’ bills for routine care, often without prior notice. Because a growing share of employer plans include high deductibles and coinsurance, patients are bearing more of these costs directly. State bans on facility fees for off-campus or low-acuity services — that is, routine services that do not require hospital-level resources — reduce that out-of-pocket exposure without restricting access to care.

Trade-offs and Limitations

Facility fee bans deliver direct out-of-pocket relief to patients, but their impact on total spending is limited because hospitals can use their bargaining leverage to make up the lost revenue elsewhere. Evidence from Connecticut’s 2017 ban on facility fees at off-campus hospital outpatient departments found relatively little impact on hospital operating margins, suggesting hospitals were able to compensate. Facility fee reform works best when paired with site-neutral payment reform, which addresses the underlying Medicare payment differential that drives hospitals to convert physician offices into HOPDs.

Existing Niskanen Work

• How site-neutral payment policies can save money for cancer patients and the chronically ill
• Healthcare abundance: an agenda to strengthen healthcare supply

Energy

Electricity affordability policy begins from a simple premise: more usable supply. That means both generating more energy and expanding the transmission infrastructure that allows energy to reach consumers, wherever they are. 

The supply crunch has become more acute as large new consumers of power, especially data centers, seek access to the grid at the same time that aging infrastructure needs to be replaced and macroeconomic forces drive up fuel costs. Captive ratepayers in 30 states saw their retail electricity rate increases outpace inflation in the last 18 months, as old wires were swapped out for new and fuel costs fluctuated amid macroeconomic supply chain issues. More rate increases are likely coming, as investor-owned utilities have requested a record $18 billion in rate increases for the upcoming year. 

Proposing more electricity infrastructure can sound like a plan to pile on another wave of costs rather than provide relief, but building the right facilities in the right way is the only way to bend down the cost curve in the long run. Solar and wind can now produce power at highly competitive prices, but we need to deploy these technologies more quickly and while pressing ahead with emerging energy-generation technologies including  geothermal and small, modular nuclear reactors.

The fact that wind, solar, and geothermal resources are geographically dispersed highlights another urgent concern: the need for interregional transmission. Modern transmission technologies can efficiently move electricity long distances, but we have built too few new miles of transmission in the last 10 years, leaving regions isolated and vulnerable to outages and price spikes from heatwaves, cold snaps, and increasingly frequent severe weather.

The transmission issue is not just a matter of building infrastructure. Fragmented markets need to be integrated. Policies that keep electricity from moving freely across state borders leave ratepayers stuck in smaller, less competitive markets that are also more vulnerable to shocks such as extreme weather. 

Policymakers should be wary of proposals that simply provide temporary relief or reallocate costs. Policies that subsidize mature power-generation technologies merely shift costs from ratepayers to taxpayers without lowering the overall price tag. Similarly, energy efficiency policies can lower usage in the short run, and grid-enhancing technologies can help the existing system operate better, but neither is a substitute for expanding supply. Our proposals are designed to bend the cost curve by allowing the electricity system to produce and deliver more of what households and businesses need. 

Still, lowering bills over the long run requires more and different generation, faster deployment, larger markets, and transmission infrastructure that makes use of modern grid technologies. This is why the energy agenda is organized around three goals:

1. Accelerate New Energy Technologies: More electricity generation is a necessary component of new supply. One of the best ways we can generate more electricity is to bring new energy technologies to scale.
2. Boost Deployment of Mature Energy Technologies: Some generation projects are ready to be deployed but they are blocked by the broken systems that govern grid interconnection, permitting, and customer access. Fixing these will make available supply usable.
3. Expand Interregional Transmission: Without a working transmission system, the power we generate has limited use. Interregional transmission is the most serious flaw in the current system, so expanding interregional capabilities is the most powerful lever for equipping the grid for the future.

Accelerate new energy technologies

When the marketplace takes advantage of a wider array of energy technologies, the increased competition brings down prices and the diversity of energy sources insures against shocks. Because each emerging technology has unique strengths and weaknesses as an energy source, in its demand profile, in its input requirements, and in its favorability with policymakers and host communities, the policies in this section are more analytical principles than granular policy proposals. Applied to a given technology, such as geothermal or nuclear, the principles can translate to policies that unlock deployment and enable scaling.

Policy Description 

Potential new technology users such as utilities and large- load customers want to deploy technologies that are cost-competitive, have proven and well-characterized performance capabilities, and can be easily adopted into their operations. This can be a barrier to bringing new technologies into the mix since they are typically more expensive, have thinner track records, and are less familiar to users. Often, the only way for a new technology to improve its value proposition is to be deployed more widely — building more will make production more efficient, bolster its track record, and familiarize users with it. But it’s a chicken-and-egg dilemma: a technology won’t get built until its value proposition is competitive with other technologies, but its value proposition can’t improve unless it’s built. Congress therefore should subsidize the capital and/or operating costs of precommercial technologies and fund programs in the Energy Department to expand public domain performance data and build training programs that make it easier for new users to adopt the new technology. These changes would enhance the prospects of advanced nuclear, geothermal, carbon capture, and other promising technologies. Analytical tools such as Adoption Readiness Levels can identify whether subsidies and incentives are still needed. A recent ARL assessment, for example, found that existing tax credits continue to be necessary for boosting the value proposition of advanced geothermal energy.

How This Improves Affordability

Energy technologies are only deployed when they can compete in the marketplace. But it’s scaling deployment that drives the cost reductions and performance improvements necessary for them to become competitive. Policy interventions can solve this chicken-and-egg dilemma by boosting competitiveness, meaning the technology will be deployed faster and become competitive. This would increase technology adoption, paving the way to commercialization that expands energy supply and intensifies market competition. A more diversified set of energy technologies deployed at commercial scale would maximize affordability in the long term.

Trade-offs and Limitations

Not every emerging technology is developed enough for interventions such as modest subsidies and improved public data to meaningfully affect its competitiveness. For those technologies that are, successful commercialization can still require other interventions to complement these value proposition improvements. Additionally, subsidies and agency programming have a short-term budget impact, albeit a small one due to the limited numbers of projects implicated. 

Existing Niskanen Work

• A Carbon Tax That Is Good for Conservative Clean Energy
  
• Geothermal policy reform: Bridging the gaps
  
• Adoption Readiness Levels for Energy Technologies

Policy Description 

Both state and federal regulations shape the commercial environment for emerging energy technologies, deeply influencing the demand among energy users. If market rules, contract standards, or regulatory approval processes are not designed to accommodate new technologies, emerging technologies won’t have an opportunity to compete. States and key federal authorities should revise procurement rules and market design and promote commercial standards with an emphasis on deploying new technology. This would mature market demand, ensure companies developing new technologies have a chance to compete, and enable the deployment needed for commercialization.

How This Improves Affordability

In the electricity sector, market design and state-level long-term procurement procedures can enable or restrict the building of a technology. A lack of contracting standards can stall deals between buyers and sellers. State and federal regulators can reform markets and planning processes so that advanced nuclear, geothermal, long-duration storage, and other emerging technologies are eligible to participate and their particular contributions are appropriately valued within the system. Likewise, contract availability for utilities, government agencies, or large customers (e.g., standard tariffs and capacity contracts) creates additional avenues for new entrants to compete.

Trade-offs and Limitations

The main hurdle for these policies is government capacity for crafting procurement reforms and standards for contracting arrangements. Market size can increase as more states and agencies implement changes, but individual states may balk at acting alone. A maturation of demand may also fail to single-handedly launch technologies toward commercialization. Instead, these policies may need pairing with other supply-side and regulatory interventions.

Existing Niskanen Work

• Next-generation geothermal power: A Commercial Readiness Assessment
  
• Adoption Readiness Levels for Energy Technologies

Policy Description 

Technology commercialization requires all of the supply-side inputs for project development to be readily available, from capital markets to component supply chains and a trained workforce. But private sector financing is lacking for new energy technologies, and components and labor for new technologies can be difficult to source when there isn’t already an active, scaled project pipeline. Congress should enact regulatory reforms and fund agency programming that expands capital access, secures supply chains, and builds the workforce needed to scale up emerging technologies. For example, CO2 pipelines cannot be scaled without skilled construction labor or CO2 technical expertise. Access to capital is vital for many emerging technologies, including geothermal and new nuclear reactors, that private investment will only fund to a limited extent. Federal agency programs can catalyze these supply-side inputs to prepare the foundation for new industry growth.

How This Improves Affordability

Targeted reforms that secure missing supply-side ingredients would help entrepreneurs complete their projects. Boosting the numbers of projects that can access the supply-side inputs to achieve commercial operation would move new technologies toward scaling, catalyzing a positive feedback loop of lower cost projects leading to further project development. This helps new technologies mature, thereby realizing the supply growth needed for affordability.

Trade-offs and Limitations

The trajectory of an individual energy technology is difficult to predict, and innovation policy must take a portfolio approach. Agency programming has budgetary impacts, and regulatory reform must achieve streamlining while preserving public input and positive environmental outcomes.

Existing Niskanen Work

• Geothermal policy reform: Bridging the gaps
  
• Next-generation geothermal power: A Commercial Readiness Assessment

Policy Description 

Successful adoption of new energy technologies can be derailed by skeptical host communities, unaligned policymakers, lack of regulatory clarity, or sluggish permitting. Congress, state legislatures, and their agency counterparts should address risks around a technology’s social license to operate. Congress and states can direct agencies to modernize regulations and permitting processes while ensuring appropriations cover staffing needs. These reforms should be designed to accommodate new technologies and streamline project development steps without losing public input. Reducing the risks of a limited license to operate can create the environment for individual projects to develop site by site, accelerating learning effects and reducing technology costs for future deployment.

How This Improves Affordability

Columbia Law School’s Sabin Center for Climate Change Law identified 459 localities in 44 states with severe energy siting restrictions. State and local regulatory and permitting regimes are a key determinant of whether an energy project can be developed, and restrictive or nonexistent regulations lead to energy scarcity. Federal regulations and processes can be critical as well, especially for technologies with high potential for deployment on federal lands, such as geothermal. New technologies face particular license to operate challenges since both government staff and the public can be less familiar with them. However, straightforward reforms can reduce regulatory barriers while preserving public involvement, enabling project development to proceed and contributing to the energy abundance that brings affordability.

Trade-offs and Limitations

Some communities or states may maintain staunch opposition to certain technologies or all energy project development. Further, the sheer number of jurisdictions and agencies that shape the license to operate for new technologies makes for a daunting landscape for policy reform. Similar to other policies to accelerate new energy technologies, reducing license to operate risk may not unilaterally boost project development. Other interventions will likely be needed to promote commercialization.

Existing Niskanen Work

• Hill action on geothermal gaining steam
• Geothermal policy reform: Bridging the gaps
• Next-generation geothermal power: A Commercial Readiness Assessment

Boost deployment of mature energy technologies

Mature energy technologies such as large-scale solar, energy storage, and gas-fired power plants are proven, and large amounts of capacity are already under development. The capacity of projects waiting to be studied in the grid interconnection process greatly exceeds the existing capacity of the U.S. grid — there is no shortage of market supply. Removing regulatory barriers would increase the number of completed projects in the coming years, allowing us to keep pace with economic development and modernize the fleet of power plants on the grid. This will push prices down compared with a scenario of sluggish supply additions and reliance on aging facilities.

Policy Description 

For new power to connect to the grid, a project must complete a series of studies and permits called the grid interconnection process. As part of the process, grid operators are required to study the electrical impact of adding new power plants to ensure the network remains stable. But the study process has become severely backlogged; completion rates are below 20 percent and wait times have doubled from two to four years. Congress and the Federal Energy Regulatory Commission should modernize these procedures to improve the flow of projects and ensure viable power plant additions are approved in a timely manner. Automation and improved coordination with other grid processes such as transmission network planning are examples of reforms to interconnection that would speed reviews and boost completion rates.

How This Improves Affordability

Interconnection processes are a major barrier to new power supply. Beyond directly delaying power plant development, the backlogs also exacerbate the dependencies that exist across other essential siting and permitting steps. For example, a grid study delay can ripple through state siting reviews or commercial transaction timelines.  Accelerating reviews and improving project flow through the queues would allow more power plants to come online in a shorter timeframe, growing supply and pushing down prices.

Trade-offs and Limitations

With large numbers of projects having waited in queues for years already, reform would have to address grandfathering and a fair transition to updated procedures. And because it is only one of several key gating mechanisms, improving interconnection could boost supply but cannot single-handedly unleash the full potential of power plant additions.

Existing Niskanen Work

• Siting, leasing, and permitting of clean energy infrastructure in the United States
• Streamlining permitting: A layered approach to accelerate wind and solar deployment
• The arithmetic of availability: Prospects for American grid dominance in 2030

Policy Description

New power plant siting and permitting is decided at the state and/or local level, depending on the state. These reviews are necessary to balance power availability and cost with environmental impacts, land use priorities, and host community goals, but they can be unnecessarily cumbersome and uncoordinated. Some review processes are unclear, some are highly restrictive, and others are not well coordinated with related project authorization steps. We can reduce delays by modernizing these processes in a way that retains their critical review functions but streamlines procedures across jurisdictions and agencies. The options include adopting clear energy project requirements, implementing “permit by rule” systems, and making targeted use of mapping tools. Congress can direct DOE to provide essential support as states and local governments take on these tasks.

How This Improves Affordability

State and local permitting delays directly impede new supply from coming online, strain projects’ commercial viability, and disrupt broader grid functions such as interconnection queues. Reforms would boost project completion rates, bringing more supply into the system.

Trade-offs and Limitations

Every state has its own unique mix of energy project siting and permitting procedures, and there is no one-size-fits-all solution to streamlining these authorizations. Tensions can also arise between state goals and local autonomy. However, there are common elements across many states’ systems, and peer-to-peer exchange, best practices, and technical assistance can illuminate the options for a given state to ensure its procedures lead toward energy abundance. 

Existing Niskanen Work

• Niskanen comments on Department of Energy’s Speed to Power RFI (see Section D)
• Streamlining permitting: A layered approach to accelerate wind and solar deployment

Policy Description 

Data centers and other large electricity users are putting pressure on prices due to their voracious power demand. Congress and state and federal regulators should ensure these customers have access to a wide range of options to meet their electricity needs. One option is “behind the meter” generation and storage, which allows large users to produce their own electricity without sending it through the larger grid. Another option is “flexible load” policies, which allow large users to shift their energy use to off-peak times and thereby rely much less on the grid. 

Federal and state regulators should make these options available by updating rules for 1) large users to connect to the grid; and 2) the utility service contracts for those customers. By offering faster interconnection to customers using these options, these measures would spur third parties to compete to provide on-site power and energy management services. They would also incentivize data centers to innovate approaches to shifting their energy use patterns. Department of Energy programming can support all of these efforts. 

How This Improves Affordability

In parts of the country where the grid is already strained to its limit, adding new large customers could put upward pressure on costs for other customers. However, if these large loads shift their use away from peak demand hours, or make substantial use of on-site power supply instead of drawing power from the grid, that may neutralize the upward cost pressure. If updated policies enable and incentivize these options for large loads, they could reduce costs.

Trade-offs and Limitations

Behind-the-meter options are workarounds to addressing the grid’s main problems: inadequate transmission capacity, outdated interconnection procedures, and clunky permitting regimes. The medium-term relief they offer would not help solve the underlying grid challenges that long-run affordability hinges on. And while these options should be made available, it’s unclear to what extent the market would use them, given that they impose conditions on power use and that a single behind-the-meter power plant is more likely to fail than connection to the full traditional grid.

Existing Niskanen Work

• Niskanen comments on Department of Energy’s Speed to Power RFI (see Section C)
• Data center energy demand: Renovating while we live here

Expand interregional transmission

Expanding interregional transmission would lower electricity costs by giving consumers access to the lowest-cost generation available across a larger geographic area. When electricity supply is no longer limited to local power plants, the power supply becomes more resilient and there is less need for redundant generation investments to guard against failures. Interregional transmission would also allow regions to share generation capacity and operating reserves, reducing the need for each to maintain its own expensive backup resources and lowering overall system costs. Together, these benefits would translate into lower system costs and, ultimately, lower electricity bills for consumers. 

Policy Description 

Interstate natural gas pipelines come online much faster than transmission lines because the Natural Gas Act gives federal regulators full siting authority, preempting state and local siting, though the pipeline still must pass state-administered environmental reviews. This, in turn, allows pipeline developers to exercise eminent domain authority to obtain land for pipelines. Unfortunately, transmission projects do not enjoy the same privileges and must navigate a patchwork of state and local approvals, so a single party can block progress on a project. Congress should extend to a narrow subset of large, nationally significant transmission projects the same treatment it gives pipelines. This could be done by establishing clear, simple thresholds that place siting and permitting for high-voltage, interstate transmission under the Federal Energy Regulatory Commission’s authority. 

How This Improves Affordability

Granting nationally significant transmission projects federal siting authority would save time in the permitting process, allowing customers to realize cost savings faster. Long distance transmission that traverses regions is often the hardest to permit but is highly cost-effective for consumers, with one national lab estimating a median value-to-cost ratio of 1.6. Not only could permitting and construction cost savings be passed onto the consumers, but expanded long-distance transmission would also enable access to lower-cost power from other regions. 

Trade-offs and Limitations

The role of states and individual landowners would be a point of contention in any federal siting framework. These interests must be balanced in any future legislative fix. Additionally, while permitting and siting constitute a significant ongoing challenge for transmission, these projects often also suffer from market barriers that need to be addressed in tandem with the siting barriers to realize the full benefits of a federal permitting authority.

Existing Niskanen Work

• https://www.niskanencenter.org/transmission-stalled-siting-challenges-for-interregional-transmission/
• https://www.niskanencenter.org/permitting-reform-is-back-and-heres-how-congress-can-get-it-done-this-time/
• https://www.niskanencenter.org/statement-for-the-record-state-of-the-bulk-power-system/

Policy Description 

Since the late 19th and early 20th centuries, alternating current (AC) transmission lines have formed the backbone of the U.S. electric grid. But as the need for the grid to move larger volumes of electricity across longer distances has grown, direct current (DC) transmission has emerged as an increasingly important tool. High-voltage direct current (HVDC) transmission lines can provide both “ancillary services,” which support the grid by helping it withstand or recover from fluctuations in supply and demand, as well as “capacity services,” which support the grid by ensuring there’s enough power available to meet future demand. However, developers of these HVDC projects currently cannot fully participate in markets that compensate providers for these services. As a result, HVDC projects are underbuilt relative to the reliability and affordability benefits they provide. The Federal Energy Regulatory Commission could address this gap by establishing a clear, nationwide framework to compensate HVDC line owners for the ancillary and capacity services their facilities provide. 

How This Improves Affordability

Severe weather and other grid disruptions cost consumers money by shutting down businesses and driving up power prices when demand exceeds supply. This is, in large part, due to the significant price volatility of natural gas, and is compounded by the grid’s over-reliance on local gas-fired power plants. Enabling HVDC lines to provide and be compensated for ancillary and capacity services would support more investment in transmission that can deliver lower-cost electricity across regions, reduce dependence on expensive local generation, and dampen price volatility.

Trade-offs and Limitations

This policy could face opposition from incumbent generation  and transmission owners who profit from existing market rules that favor local resources. Designing a fair compensation framework is complex and could risk distorting market signals if not done carefully. In addition, realizing the full benefits depends on broader transmission expansion and siting reforms, which can be slow and contentious. 

Existing Niskanen Work

• https://www.niskanencenter.org/how-congress-can-enable-a-more-resilient-grid/
• https://www.niskanencenter.org/winter-storm-ferns-impact-on-the-price-of-power-and-what-to-do-about-it/
• https://www.niskanencenter.org/the-winter-of-our-grids-discontent-hardening-the-grid-once-and-for-all-after-winter-storm-fern/
• https://www.niskanencenter.org/hvdc-transmission-can-improve-reliability-and-affordability-if-we-let-it-compete/

Policy Description 

While mechanisms exist to plan transmission at both the local and regional levels, no such framework exists for interregional transmission. There are two potential solutions to this blind spot. First, FERC could mandate planning to occur among neighboring grid regions and lay out the common framework to do so. Second, Congress could mandate that neighboring grid regions maintain a certain percentage of backup transfer capacity between them. Either solution could spur the development of interregional transmission.

How This Improves Affordability

According to analyses by national labs, long-range transmission that connects grid regions is highly cost-effective compared with more localized forms. However, incumbent transmission providers avoid building such projects to reduce market competition faced by their own power plants. More interregional transmission would expand competition in wholesale power markets, putting downward pressure on power prices. These savings could be passed on to consumers.

Trade-offs and Limitations

Both approaches involve tradeoffs. An interregional planning mandate could face political resistance due to the complexity of coordinating across regions, while a fixed transfer capacity requirement risks being overly rigid and misaligned with actual system needs. Both approaches also raise difficult questions around who pays for new transmission, how benefits are measured and distributed, and potential local opposition to siting.

Existing Niskanen Work

• https://www.niskanencenter.org/ferc-is-coalescing-around-the-idea-of-minimum-transfer-capacity-but-needs-data-and-definitions/
• https://www.niskanencenter.org/permitting-reform-is-back-and-heres-how-congress-can-get-it-done-this-time/
• https://www.niskanencenter.org/minimum-transfer-requirements-are-a-foundational-step-towards-a-stronger-grid/

Policy Description 

Right-of-first-refusal (ROFR) laws allow incumbent utilities to block competitors from building new transmission lines, even when other developers could do so more cost-effectively. Today, roughly a dozen states have either enacted or are considering ROFR laws, typically at the urging of incumbents looking to lock in profits. Congress or FERC could preempt these laws and restore competitive, open bidding for transmission projects nationwide.

How This Improves Affordability

Guaranteeing that utilities have the first shot at building any proposed projects in their service territory (and recover costs plus profits from their ratepayers) weakens incentives to control spending and discourages innovation. This leads to a cycle where only smaller, less efficient projects — ones that stay within a utility’s existing territory — get built. The end result is a more expensive and less effective transmission system. Residents in Minnesota are estimated to pay an additional $15 million per month on their electricity bills as a result of the enactment of an ROFR law, costs that could be saved if the law were preempted or eliminated. Studies suggest that competitive bidding for transmission projects can reduce costs by 20 percent to 30 percent overall.

Trade-offs and Limitations

In stark contrast to utilities that often promote ROFR laws, both the Trump and Biden administrations have clearly and consistently viewed state ROFR laws as anticompetitive and discriminatory. Utilities often argue that ROFR laws enable faster, more predictable development of transmission projects. But recent research has challenged this claim, suggesting that competitive solicitation is largely not a factor that slows down transmission projects. 

Existing Niskanen Work

• ROFR laws fragment America’s transmission grid
• Niskanen Center supports transmission competition to lower costs and strengthen U.S. competitiveness
• Coalition letter: FERC should rethink its proposed conditional ROFR in its transmission rulemaking

1. Bureau of Labor Statistics, “Consumer prices up 9.1 percent,” July 18, 2022; BLS, “12-month percentage change, Consumer Price Index, selected categories,” n.d.; St. Louis Federal Reserve Bank chart of various inflation indicators. Two common measures of real wages – median real weekly earnings and average real hourly earnings – have rebounded to roughly equal or above their December 2019 levels. (The apparent spike in real wages at the start of the pandemic was driven by changes in the composition of the workforce amid mass layoffs.) ↩︎
2. The most common measure of consumer sentiment, from the University of Michigan, has hit historic troughs since the post-Covid run of inflation. Changes in survey administration have likely driven the reading artificially down, but even adjusted for that concern, it remains far from indicating optimism about the economy. The Conference Board’s Consumer Confidence Index is similarly sluggish. And polling continues to suggest that the cost of living remains a major concern. The previous troughs in the Michigan index from its 1966 base of 100 occurred in February 1975 (57.6), May 1980 (53.6), and December 2008 (57.7). Since 2022, the series has been below the December 2008 level 13 times. See “The Index of Consumer Sentiment,” University of Michigan. Joel Wertheimer argues persuasively that 2024 changes in the survey’s administration have depressed the index, but even with his adjustments, readings fell below the Great Recession trough three times in 2022 and the recovery looks weak. Wertheimer, Is the vibecession real — or is the survey broken?, Silver Bulletin, June 29, 2026. For Conference Board data, visit “US – Consumer Confidence,” MacroMicro. In polling, “cost of living/inflation” continues to dominate Gallup’s open-ended survey of biggest financial problems. Inflation also continues to dominate Gallup’s “most important problem” survey, with 14 percent of respondents choosing it in June 2026. ↩︎
3. See, e.g., Stacy Vanek Smith, “Economic data is looking good. So why the glum vibes?” Marketplace, June 24, 2024; Will Stancil, Bluesky post, April 10, 2026; Brad deLong, “The “Vibecession” Is Losing Its Vibe,” podcast, Feb. 7, 2024. ↩︎
4. See, e.g., Jared Bernstein and Daniel Posthumus, “The way we were: Price-level shocks and consumers’ memories,” Stanford Institute for Economic Policy Research, May 2026; G. Elliot Morris, “It’s the Prices, Stupid,” Strength in Numbers, April 14, 2026. ↩︎
5. Annie Lowrey, “The ‘Vibecession’ Is Over. The ‘Permacession’ Is Here,” The Atlantic, May 24, 2026; Jacob Weindling, “The Vibecession is Entirely Rational,” Jezebel, May 27, 2026. ↩︎
6. For another example of the “fast and slow” framework applied to populism, see Joseph Heath, “Populism fast and slow,” In Due Course, Oct. 19, 2025. ↩︎
7. Peyton Whitney, “Home Prices Surge to Five Times Median Income, Nearing Historic Highs,” Harvard Joint Center for Housing Studies, Oct. 6, 2025. ↩︎
8. Federal Reserve Bank of Atlanta, “Home Ownership Affordability Monitor.” ↩︎
9. Salpy Kanimian and Vivian Ho, “US Medical Prices and Health Insurance Premiums, 1999-2024,” JAMA Network Open. ↩︎
10. Gallup, “Most Important Problem.” ↩︎
11. This is one way to interpret Gallup’s open-ended polling on Americans’ largest financial problems, where “high cost of living/inflation” has pulled away from single-issue concerns such as the cost of housing or healthcare. Lydia Saad, “Affordability Still Dominates Americans’ Financial Worries,” Gallup, April 28, 2026. ↩︎
12. Peyton Whitney, “Home Prices Surge to Five Times Median Income, Nearing Historic Highs,” Harvard Joint Center for Housing Studies, Oct. 6, 2025. ↩︎
13. Federal Reserve Bank of Atlanta, “Home Ownership Affordability Monitor.” ↩︎
14. Joint Center for Housing Studies of Harvard University, “The State of the Nation’s Housing 2026 Key Facts.”  ↩︎
15. Salpy Kanimian and Vivian Ho, “US Medical Prices and Health Insurance Premiums, 1999-2024,” JAMA Network Open; Derek Jenkins, Sasathorn Tapaneeyakul, Vivian Ho, “Prices Versus Costs: Unpacking Rising US Hospital Profits,” Sep. 6, 2024. ↩︎
16. US Energy Information Administration, “Short Term Energy Outlook,” October 2020; US Energy Information Administration, “Short Term Energy Outlook,” July 2026. ↩︎
17. US Energy Information Administration, “2024 Residential Utility Disconnections Report,” Apr. 14, 2026; National Energy Assistance Directors Association, “Home Heating Expenditures Projected to Increase by 7.6%, Electricity Increases Twice the Rate of Inflation,” September 2025. ↩︎
18. For more on rent-seeking, see David R. Henderson, “Rent Seeking,” Econlib, n.d. ↩︎
19. See Steve Teles, Sam Hammond, and Daniel Takash, “Cost Disease Socialism: How Subsidizing Costs While Restricting Supply Drives America’s Fiscal Imbalance,” Niskanen Center, Sept. 2021; Eric Helland and Alex Tabarrok, Why Are the Prices So Damn High? (Mercatus Center, 2019). ↩︎
20. Teles et al., “Cost Disease Socialism.” ↩︎
21. See Gallup, “Affordability Still Dominates.” ↩︎
22. Teles et al., “Cost Disease Socialism.” ↩︎
23. See Elizabeth Pancotti et al., “Affordability for All,” Groundwork Collaborative/Local Progress/State Innovation Exchange; Demos/People’s Action Project, “Solving the Affordability Crisis,” June 11, 2026. ↩︎
24. On ways to improve redistribution, see Ed Dolan, “A social safety net for an age of uncertainty,” Niskanen Center, April 9, 2020; David Dagan, “Free money: Milton Friedman, unconditional income, and the neoliberal inheritance,” Hypertext (Niskanen Center, Nov 15, 2023). ↩︎