Three Ways State and Local Leaders Can Lower the Cost of Living

Survey after survey shows that Americans are deeply concerned about the cost of living. After an extended period of inflation, they report feeling stressed about groceries, housing, health care and the potential for tariffs to increase their costs. If people cannot make ends meet, it is very hard to make choices that might lead to a better future for themselves and their families.

While state and local leaders are grappling with increasingly strained budgets, they still have some powerful tools at their disposal to help address this affordability crisis. There is no silver bullet, but with practical, cost-effective, evidence-based solutions, they can help residents find some relief.

Here are three policy pathways leaders should explore: eliminating inefficiencies that increase the costs of essential goods and services; taking expenses off household books; and helping families bring in more money.

Addressing Supply and Labor Rules

One strategy for lowering costs is increasing supply. As I noted in my last column, we need more affordable apartments and houses to help bring down the cost of housing, but anachronistic zoning and red tape can hold up construction. States and cities are finding ways to speed up production by streamlining review and permitting processes and revising zoning codes.

Policymakers can also bring down costs by making it easier for people to enter careers in fields that need more workers. For example, states can take a fresh look at licensing requirements to ensure that a genuine need for consumer protection continues to exist and justifies the competitive advantage provided to incumbents. Hair braiders, florists and interior designers, for example, all must contend with requirements that limit the number of providers, driving up prices.

In health care, occupational licensing rules restrict what nurse practitioners and physician assistants are allowed to do, but states with more flexible rules tend to have lower costs for routine care, without sacrificing quality.

Opening new pathways to employment, meeting employer demand and lowering costs are nonpartisan objectives that can find common ground.

Easing Household Expenses

Although harder to do in the current climate, states can also ease household expenses by sharing the cost of expenses that have broader economic and social benefits, like child care, health care and public transportation. Over time, such benefits should lead to lower public costs.

One example: Universal preschool can cut down on child-care costs shouldered by families, with one study estimating that universal pre-kindergarten would save families $17 billion a year on child care. The benefits go beyond savings by improving school readiness and setting children up for long-term success.

Oklahoma was one of the first states in the country to offer universal pre-K for 4-year-olds, launching the program back in 1998. In Tulsa, home of the state’s largest school district, college enrollment was 12 percentage points higher for students who attended pre-K, compared with those who did not. Such moves should lead to higher labor force participation for parents, higher taxable wages and less need for public support over time.

Increasing Opportunity and Incomes

Affordability is not just a matter of rising costs but is also a reflection of the income and savings residents have to cover everyday expenses and weather financial emergencies. State and local leaders can help families increase their resources by supporting job training and higher wages and ensuring that eligible residents can access public benefits for support.

Registered apprenticeships offer a debt-free path to good jobs and have demonstrated the ability to increase earnings by 49 percent. Apprenticeship opportunities have expanded beyond trades to jobs in technology, health care, education and other growing sectors. States can create, expand and strengthen apprenticeship programs, yielding benefits to workers and employers. They can also remove unnecessary red tape and bureaucratic hurdles that hold up the creation of new registered apprenticeships. State and local leaders can hire apprentices in government agencies, broker connections across stakeholders like employers and various kinds of schools and expand youth apprenticeships.

For public benefit access, states can help eligible residents by minimizing red tape, simplifying application processes, improving outreach efforts and sharing data across agencies to ease enrollment in multiple programs.

Maryland recently announced a new initiative to encourage more residents to claim the state’s earned income tax credit (EITC) and child tax credit. Nearly 100,000 eligible tax filers in Maryland did not claim the state EITC during the 2023 tax season, leaving money on the table that could have helped them afford groceries, rent and child care. By identifying the barriers that prevent residents from accessing these tax benefits and providing tax filing supports, state leaders hope to increase uptake.

Few issues are more salient now than affordability. State and local leaders can be responsive to their constituents with smart, sustainable strategies — some at little cost — to help ease financial pressures on residents. And once families aren’t constantly struggling to cover the basics, they can start to look ahead, save and invest in their futures. Tackling the affordability crisis isn’t just about short-term relief; it’s about creating the conditions for long-term opportunity and upward mobility.

Sarah Rosen Wartell is the president of the Urban Institute.

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Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.