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Edited by: Brady Africk and Hannah Bowen

Happy Thursday! In today’s newsletter, we examine America’s housing shortage, economic populism in the New York mayoral primary, and the value of free market economics.

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1. California’s Home Shortage

Topline: New data estimate that the US currently faces a major housing shortage of between 3.8 million and 8.2 million homes. AEI’s Tobias Peter and Edward J. Pinto pinpoint local shortages and find that California is the epicenter of the issue, with approximately two million missing homes traced back to the state.

A Regional Failure: By itself, California accounts for about 1.4 million missing homes. With a history of tight regulations, housing prices have soared while supply continues to falter. The problem has bled into California’s neighboring states. As people have fled California’s high housing costs, mass movement across state lines has driven up home prices and rents in receiving states such as Nevada and Idaho.

Added Pressure: Housing shortages are a nationwide problem, but restrictive zoning, challenging permitting processes, and resistance to new development have intensified the issue.

Build Better Homes: To address this ongoing crisis, Peter and Pinto argue that boosting supply in states with the most severe shortages is essential. Allowing smaller lot sizes in new subdivisions, enabling single-family-to-townhome conversions in expensive neighborhoods, and adding mixed-use zoning in underused commercial corridors are potential policy solutions to alleviating housing shortages in the next decade.

2. Populism in Practice

Topline: A postelection survey found that 68 percent of working-class, noncollege-educated voters say Democrats have moved too far left. Democratic socialist Zohran Mamdani won a large victory in the New York City Democratic mayoral primary, but AEI’s Ruy Teixeira warns against viewing his win as major shift in what voters want.

The Working Class: After immigration and inflation, voters said Kamala Harris’s focus on cultural issues was the third-most-relevant reason they chose Donald Trump. Teixeira contends that Mamdani’s economic populism will not be a successful answer for Democrats looking to offset the cultural radicalism lamented by many of the party’s working class voters.

A Special Case: Teixeira argues that New York City can’t be generalized to the rest of the country, as illustrated by Harris’s 38-point lead in the city in the 2024 election.

“Instead, for working-class voters in most areas of the country to seriously consider their economic pitch, Democrats need to convince them that they are not looked down on, that their concerns are taken seriously, and that their views on culturally-freighted issues will not be summarily dismissed as unenlightened.”—Ruy Teixeira

3. In Defense of Free Markets

Topline: In a recent interview with The New York Times, Vice President JD Vance expressed the belief that “the market economy is the best way of provisioning goods and services and coordinating people across a very complex society” but that the market is a “tool,” rather than “the purpose of American politics.” AEI’s Michael R. Strain makes the case that increasing market efficiency is not just a tool but instead should be the proper goal of the government.

Market Solutions: Hard work pays off in free market economics as productivity largely determines compensation and therefore promotes agency and personal responsibility. Economic growth in a free market system also reduces social conflict, as it allows some people to be better off without requiring others to be worse off. Furthermore, free markets have historically proven to be a highly effective antipoverty tool, as the share of the world population living on less than $1 per day decreased significantly between 1970 and 2006 as the developing world began adopting them.

Government Overreach: Realistically, protecting free markets must exist simultaneously with other important economic, political, and cultural objectives. Some government interference in markets that align social and private costs and benefits is valuable—but it cannot overstep the value of free enterprise. Both the MAGA right’s industrial policy and trade wars and the left’s large social programs attempt to push government policy in place of markets, hurting both political and economic liberty.

“And when the government is putting its thumb—or, more accurately, its fist—on the scale to determine the prices you face and the occupation you practice, political liberty is both diminished and threatened.” —Michael R. Strain

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