Nowak Metro Finance Lab

The United States is undergoing a rapid, uncoordinated defederalization, where responsibilities traditionally held by the federal government are being shifted to states, localities, and other sectors without a clear plan or adequate support.

As federal funding shifts from investment to cuts, local governments must act now. Conducting “stress tests” will help assess risks, engage stakeholders, and develop response plans. Proactive planning ensures communities can adapt and protect essential services amid fiscal uncertainty.

The National Housing Crisis Task Force has released tools to help communities tackle the housing crisis. The State and Local Housing Action Plan highlights innovative strategies in land use, capital, construction, regulation, and governance. With reduced federal support, state and local leaders can use these tools to boost housing production and affordability. Initial tools focus on zoning reforms, tax incentives, and modular construction.

The Trump Administration’s policy shifts have created financial uncertainty for cities and states. NYC’s Comptroller analyzed the city’s reliance on federal funds, highlighting risks to entitlement programs, public services, and infrastructure. This model can help other municipalities assess their fiscal exposure. With federal cuts now a reality, local governments must prepare for the impact.