Three core problems the District can no longer ignore

The District of Columbia is entering a different phase of governing, one that no longer benefits from the steady tailwinds that shaped much of the past two decades. For years, growth did a significant share of work. Rising population, expanding employment, and increasing revenues made it possible to address problems incrementally. The city could add programs, strengthen protections, and take on new responsibilities while the underlying economy continued to expand. Those choices carried real costs, but growth made such costs easier to absorb.

That environment has now changed.

Data point to a clear slowdown in the District’s underlying growth trajectory. Population growth has nearly stalled, employment gains have reversed, and inflation-adjusted revenues have flattened, even as operating costs continue to rise. The city remains well-managed fiscally, but it is no longer operating in an environment that quietly offsets policy complexity and rising costs.

Economic and fiscal growth in the District has slowed or reversed: Average annual growth, 2010 to 2019 versus 2020 to 2025

Declining and stagnant growth raise the stakes of every policy decision. When growth slows, the margin for error narrows. Policies that were sustainable in a period of expansion become harder to maintain, and incremental adjustments are less likely to be sufficient.

A balanced budget, in this context, is necessary but not sufficient. When the underlying economy weakens, a balanced budget can mask growing pressures— postponed investments, one-time solutions, or choices that shift costs into the future. Fiscal discipline can manage constraints, but it cannot resolve them. Over time, fiscal health follows economic health, not the other way around. This distinction matters now more than ever before.

The current slowdown has emphasized three structural problems that will shape the city’s trajectory regardless of who holds office in the coming years:

• The city is not producing enough to sustain affordability and opportunity. Housing supply remains constrained. Business formation has slowed. Providers across sectors face regulatory barriers they can no longer handle. When production lags, the city relies more heavily on subsidies to protect residents. Those subsidies are essential, but they cannot keep pace with rising costs when the underlying system is not producing enough.
• Government systems are not consistently delivering results. Regulatory uncertainty and slow, confusing processes in basic regulatory functions such as permitting, inspections, licensing, and reviews are causing delays and increasing costs in unpredictable ways. This slows the creation of housing and jobs and reduces participation by smaller providers and nonprofit organizations. These began as isolated inefficiencies but have become system-wide constraints that shape outcomes.
• Fiscal discipline and economic strength are beginning to diverge. The District’s financial management remains strong, but slower growth, rising structural spending, and increasing reliance on subsidies make long-term stability harder to sustain. Budget discipline cannot substitute for an economy that is growing and generating opportunity.

This note examines these three problems in greater depth and offers policy recommendations grounded in a simple premise: long-term affordability, equity, and fiscal stability depend on a city that can produce housing, support good jobs, and reliably deliver public services.

The city is not producing at the scale needed to sustain affordability and opportunity

In a well-functioning city, supply responds to need. Housing is built where people want to live. Businesses form where opportunities exist. Services expand when demand is unmet. Over time, this responsiveness keeps costs in check and expands access. This relationship has weakened in the District.

Housing production surged in the 2010s—though not enough to make up for forty years of nonproduction—but has since slowed. [1] New business formation has declined, [2] and the city is no longer effectively competing for investment and major employers. [3] Providers in sectors such as childcare, neighborhood retail, and health services face regulatory, cost, and financing barriers that discourage entry. The result is less competition, reduced supply, and long-term pressures on affordability.

When production falls short and prices rise, the city turns to subsidies and mandates to protect residents. These tools are necessary and reflect the District’s commitment to equity. But they cannot substitute for supply. When the underlying system does not produce enough, subsidies help some households while leaving overall costs high and, in some cases, pushing them higher for those who do not qualify for public assistance.

Over time, this creates a widening gap between need and capacity. People leave for places where they can more easily meet their needs. Employers and firms move to where they can produce. A city that does not produce enough housing, enough services, and enough jobs eventually reaches the limits of what redistribution alone can accomplish. Restoring the city’s ability to produce is therefore not about ideology; it is about making affordability and inclusion sustainable over the long term.

Government systems are not consistently delivering the results residents expect

The District’s high cost of living is not the result of any single policy. More often, it reflects the cumulative effect of many rules, reviews, and procedures that operate separately but interact in practice. Permitting, inspections, licensing, environmental review, design approval, and compliance processes often involve multiple agencies with different timelines and limited coordination. Each step may serve a legitimate purpose, but taken together, they create delays, uncertainty, and added costs.

Uncertainty and delays affect the city’s ability to meet basic needs. When approvals are unpredictable, housing takes longer to build. When reviews take years instead of months, projects become more expensive. When requirements change late in the process, smaller providers and nonprofit organizations struggle to participate. The result is fewer homes, fewer services, and fewer opportunities, even when policy goals are widely shared.

Operational performance of the District of Columbia Government therefore functions as social policy as well as economic policy. The speed, consistency, and reliability of government processes influence housing costs, business formation, and the availability of childcare, health services, and neighborhood amenities. These impacts rarely appear in a single budget line, but they are felt by residents in the form of higher rents, rising prices, and fewer choices.

Cities that succeed in maintaining affordability and opportunity treat execution as a core responsibility. They set clear service standards, track performance, and adjust systems when they do not work. The District has made progress in some areas, but performance remains uneven, and the cost of inconsistency falls most heavily on working households, small providers, and communities with fewer resources.

Improving government operations is one of the few policy changes that can reduce costs across the system without weakening public protections. In a slower-growth environment, effective administration becomes one of the most important tools the city has.

Fiscal discipline and economic strength are beginning to diverge

The District’s financial management is among the strongest of any U.S. city. Balanced budgets, healthy reserves, and independent financial oversight have maintained confidence through periods of uncertainty. These are real strengths, and they should be preserved.

But financial discipline cannot substitute for economic strength.

The city’s current fiscal framework was built during a period of steady growth, when rising population, expanding employment, and increasing property values supported reliable revenue gains. That environment has weakened but spending commitments have not adjusted at the same pace. Recent budgets reflect this tension clearly. In this fiscal year (FY 2026), roughly 10 percent of approved general fund spending—about $1.4 billion—is being financed with past savings rather than with recurring revenues. At the same time, the adopted financial plan assumes a reduction of $839 million in FY 2027 spending, a cut of more than six percent. [4] The District has not faced adjustments of this scale since the Great Recession.

This is a system under strain. Growth has not returned, as hoped, to ease these pressures, and as revenues flatten in real terms, the city faces increasingly constrained choices.

As in the past years, there will be pressure to raise taxes to sustain spending levels that were already built on weak fiscal foundations. That pressure will be especially acute in this election year, when the political costs of reducing services or delaying commitments are high. Raising taxes may appear to bestraightforward solution. It is not.

Higher taxes can close a gap in the short term, but they do not address the underlying problem: a slowing economy that is not producing enough housing, jobs, or investment. In some cases, they can make these challenges harder—by reducing competitiveness, discouraging business formation, and accelerating the outmigration of households strained by high costs.

More importantly, raising taxes  does not change the trajectory. Without restoring growth, the same pressures will re-emerge in subsequent  budget cycles. A strategy that relies on higher taxes to sustain existing commitments, without expanding the city’s capacity to generate opportunity, risks repeating the same choices under tighter constraints.

Those who argue for higher taxes often sidestep the harder question: why has budgeting become more difficult in the first place? Higher taxes can close a near-term gap, but they fail to address the symptom, a budget imbalance, leaving the underlying causes unresolved.

A durable path forward requires reconnecting fiscal policy to economic performance. The District’s long-term stability depends on its ability to grow by building housing, supporting job creation, and attracting investment that expands the tax base. When the economy grows, public commitments become easier to sustain. When the economy stalls, fiscal pressures intensify.

Restoring alignment between economic capacity and fiscal commitments is therefore essential to maintaining affordability, protecting public services, and ensuring that the District remains a place where people of all incomes can live and thrive.

Policy direction: restoring the city’s capacity to produce and deliver

The District’s challenge lies in the gap between its ambitions and what its systems can consistently sustain. The recommendations below–organized around this essay’s premise that affordability, equity, and fiscal stability depend on a city that can produce and a government that can reliably deliver services–are designed to close that gap.  The objective is to ensure that public commitments remain achievable over time.

Restore the city’s ability to produce housing, jobs, and services

The most direct way to address rising costs is to increase supply. Without that, every other intervention becomes more expensive and less effective.

1. Pair subsidies with supply expansion. Subsidies are essential, but they must be linked to policies that increase production. Otherwise, public spending will continue to rise without resolving affordability pressures. Where the city provides substantial subsidies (such as housing and childcare), it should also reform the underlying rules—making it easier to build, operate, and expand—so public spending increases capacity rather than compensating for its absence.
2. Assess the cumulative impact of regulations on housing and service delivery. Before adopting new mandates, the city should evaluate how existing requirements affect the cost and feasibility of building housing, opening childcare centers, or operating small businesses. This ensures that well-intended policies do not unintentionally reduce access or raise costs.
3. Expand by-right housing in high-opportunity areas.  Allow more housing—especially near transit, jobs, and strong infrastructure—without discretionary approval. This reduces delay, lowers costs, and expands access to opportunity across neighborhoods.
4. Create a single point of accountability for major projects. Assign a coordinating authority for large housing and infrastructure projects to manage approvals across agencies and resolve conflicts. Fragmentation is a primary source of delay; coordination is the most direct fix.
5. Make timelines predictable and binding for core approvals. Set and publish clear service standards for permitting, inspections, and plan review, and measure  performance against these standards. Predictability lowers costs, reduces risks, and enables more housing and business activity without weakening protections.

Shift government from managing scarcity to enabling production

The city cannot subsidize its way out of constraints it continues to reinforce. Policy must move from reacting to scarcity to removing its causes.

1. Establish an executive-level office focused on implementation and problem-solving
   Create a separate entity to identify and resolve bottlenecks across agencies. Effective execution is essential to achieving policy goals.
2. Hold agency leadership accountable for service delivery outcomes. Timeliness, consistency, and responsiveness should be part of performance evaluation for senior officials, because delays in government processes increase costs for residents and providers alike.
3. Consolidate housing policy, development, and financing functions under a single economic development umbrella. Rather than dispersing them across multiple agencies with overlapping mandates, all functions related to housing production, subsidy programs, and development approvals should be placed within one lead entity. This would allow the city to set clear priorities, coordinate decisions, and advance projects more efficiently. Clear ownership improves accountability, reduces delays, and better aligns housing outcomes with the city’s broader economic goals.
4. Make performance visible and consequential. Track and publish timelines for high-volume services—permitting, licensing, inspections, procurement—and use them to hold agencies accountable. What gets measured improves; what remains invisible persists.
5. Require implementation plans for major legislation. Major legislation should include realistic timelines and detailed staffing and administrative plans. Without this, programs risk adding complexity without delivering results.

Reconnect budgets with economic reality.

Fiscal discipline is necessary, but it is not sufficient. Long-term stability depends on growth and policy should be evaluated and measured against the goal of economic growth.

1. Require long-term economic and fiscal analyses for major policy proposals. Budget costs are not enough to fully evaluate the impact of major policy proposals. Policymakers should consider how proposals affect housing supply, employment, investment, and the tax base over time.
2. Match ongoing spending commitments with sustainable revenue sources. Strong public programs depend on a stable economy. Permanent spending should be supported by recurring revenue so that future budgets are not forced into sudden cuts or tax increases. Programs that are one-time on paper, but recurring in nature should be treated as such. The financial plan should reflect historic patterns, and anticipated policy changes.
3. Improve coordination between economic policy and financial oversight. Budget decisions, development policy, and economic strategy should inform one another so that the city’s fiscal health and economic health move in the same direction.
4. Review existing programs in light of current economic conditions. Policies adopted during periods of rapid growth should be re-evaluated to ensure they remain effective and sustainable in a slower-growth environment.

Use public policy to reduce long-term costs.

Public policy should expand capacity and lower structural costs, not simply respond to them.

1. Prioritize investments that lower the cost of living over time. For example, investing in infrastructure that enables more housing near transit or expanding shared childcare facilities lowers operating costs and expands supply, reducing the need for larger subsidies over time.
2. Protect deep assistance for households with the greatest need. Targeting resources where they are most needed helps maintain strong safety-net programs while keeping them financially sustainable.
3. Regularly evaluate major subsidy programs for long-term sustainability. Programs should be assessed to ensure they remain affordable and effective as economic conditions change. This includes examining per-unit costs, tracking whether programs are delivering more outcomes for each dollar spent, and identifying signs of mission creep that expand scope without improving results. Subsidies should be designed to address clearly defined gaps—not to compensate indefinitely for constraints that policy can remove.
4. Lower barriers for providers to enter and expand. Make it easier for nonprofit providers, small businesses, and community organizations to participate in the economy. More participants increase supply and reduce costs.

Treat growth and execution as core policy responsibilities.

Growth is not automatic, and government performance is not secondary. Both must be actively managed.

1. Make growth an explicit objective of policy. Population retention, job creation, housing production, and investment should be explicit goals because they make strong public programs possible.
2. Recognize reliable government as affordability policy. When core systems function predictably, they lower costs across the board. Faster, more consistent permitting reduces construction time and financing costs, making housing less expensive to deliver. Reliable transit shortens commutes and expands access to jobs without requiring households to spend more on transportation. High-performing schools reduce the need for private alternatives and support long-term workforce outcomes. When public services work as intended, households face fewer hidden costs, and opportunity becomes more accessible.
3. Evaluate rules based on whether they enable production. Policies should be assessed against current conditions and whether they help the city build, hire, and scale under today’s economic realities.
4. Strengthen predictability and trust in public decisions.  Clear rules, consistent enforcement, and reliable timelines encourage investment in housing, businesses, and community services that residents depend on.

Conclusion

The District is entering a period where governing will be judged less by how much is spent and more by how well the city delivers. The current administration has maintained fiscal discipline under increasingly difficult conditions and continued to support residents through a period of real strain. That foundation matters. The challenge now is to ensure that the city’s systems can sustain those commitments going forward.

Affordability, equity, safe neighborhoods, good schools, and reliable services all depend on the same underlying capacity: the ability to produce housing, support job growth, and deliver services consistently. When that capacity weakens, the cost of maintaining these commitments rises, and the burden falls most heavily on working households.

For many years, growth made it possible to manage complexity and delay without immediate consequence. That environment has changed. The city can no longer rely on growth to offset inefficiencies or rising costs. It must rely more directly on how well its systems function—how quickly it can build, how predictably it can approve, and how effectively it can deliver.

When the city produces and delivers reliably, costs stabilize, public programs become easier to sustain, and policymakers have greater flexibility to respond to new challenges. When it does not, costs rise faster than incomes, fiscal pressures intensify, and even well-designed policies become harder to maintain.

The task ahead is to restore alignment between economic capacity and public commitments. Growth, fiscal discipline, and equity are mutually reinforcing when the system works. Ensuring that the District can build, hire, and deliver at scale is what will determine whether it remains a place where people of all incomes can live and thrive in the years ahead.

That is the governing challenge of the coming decade — and meeting it will determine whether the District remains both prosperous and inclusive.

[1] During 2010s, in a typical year, developers pulled 4,352 permits in multifamily buildings. That number rose slightly in the first four years of the pandemic to 5,368 but has slowed down to 1,430 since 2024. Source: New Privately Owned Housing Units Authorized, annua averages from U.S. Census Bureau.

[2] Between 2020 and 2024, in a typical year the city added approximately 2,500 new business establishments. In the first quarter of 2025, the number of business establishments declined nearly by 1,000. Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

[3] The District’s location quotient for employment in business establishments with 250 or more employees exceeded 1 in 2020, meaning that the city was outperforming the nation in attracting these kinds of establishments when controlled for its size. That number declined below 1 (0.90 to 0.95 depending on class size) by 2025.

[4] FY 2027 budget is still relying on $285 million of fund balance use. Without this, spending would have had to decline by 8.2 percent.