Consider a riddle: What is the thing that sounds like inflation but isn’t, and is in fact nearly impossible to disprove with data showing inflation has cooled? It’s “affordability,” the Bête noire of incumbent politicians and the emerging political buzzword of 2025—and potentially far beyond.
Affordability emerged as the common theme of Democrats’ sweep of the November off-year elections, with progressive Zohran Mamdani of New York and centrists Mikie Sherrill of New Jersey and Abigail Spanberger of Virginia emphasizing its importance. Most recently, the Mamdani-like Katie Wilson of Seattle, a 43-year-old never elected to any office before, rode affordability to a shock victory in the Emerald City’s mayoral race.
One leading economist, Paul Donovan of UBS, warned on Friday that the term “affordability” is a slippery concept, and the politicians benefitting from it today may be fighting against it tomorrow. It simply has an anti-incumbent bias. Donovan notes that affordability is a deeply subjective measure, often wielded as a political tool rather than an objective economic indicator. For politicians seeking to win over voters, the temptation is to promise solutions, even when these promises are based on poorly defined or shifting benchmarks fueled by social media narratives.
Social media platforms have emerged as powerful, narcotic influences, fueling a dangerous kind of FOMO feeling. That can influence perceptions about the economy as well.
“Affordability also includes some kind of aspiration,” wrote Donovan, global chief economist for UBS Wealth Management, on his weekly blog. “People want things (generally ‘better’ things than they currently have) and are upset that they cannot afford those things.”
When social media presents an idealized image, he added, this “fuels resentment about a lifestyle that cannot be afforded.” He warned that affordability—and therefore affordability politics—may become a more enduring problem than in the past, lingering in the culture.
Inflation can be low, but affordability can remain out of reach
The sentiment “I cannot afford that” is central to anger at this moment in time, according to Donovan, and this rests on an emotional response to the economy that is difficult to reconcile with data showing that inflation may have in fact cooled in backward-looking data.
“While inflation is a general increase in prices, affordability is normally directed at specific, large expenses such as home ownership. Consumer price inflation is a plutocratic statistic, biased toward high income groups’ spending patterns,” he explained. “Affordability, being political, is democratic.”
So even when inflation isn’t surging by economists’ metrics, the perception of inflation can still make voters angry. Amherst Group CEO Sean Dobson attempted to explain this dynamic in a recent interview with Fortune, saying that inflation as measured by the Federal Reserve is very different from what consumers experience.
“They [the Fed] measure the inflation at the time it’s felt by the consumer,” he said on the sidelines of the ResiDay conference in New York, meaning that inflation can be relatively stable month-over-month from a statistical perspective, but if someone needs to rent a new apartment or buy a house, they get sticker shock from how much prices have gone up over several years, due to spurts of inflation that are now in the recent past. “So, everyone’s right that the Fed is late because the actual economy’s going down [in inflation], the rent growth’s going down a while ago. But that rent growth doesn’t hit everyone in real time.”
From the Fed’s perspective, Dobson added, “they can’t make policy based on a projection. They have to do it based on the hard, backward-looking data.” But in the consumer’s mind, they experienced no inflation for something like three lease renewals in a row, and then the next time their lease came up for renewal, “the same house cost 100% more. But in between that was all the gradual inflation that wasn’t measured.”
Onstage at ResiDay, a member of the Trump administration sounded angry at this dynamic. Bill Pulte, director of the Federal Housing Finance Authority, called into the conference and argued forcefully that inflation is cooling in the data, and the Federal Reserve is blind to the plight of most Americans’ affordability concerns. Federal Reserve Chair Jerome Powell isn’t “not looking at the data” which shows that “inflation is way lower.” The high mortgage rates above 6% are “really hurting a lot of people,” Pulte added. “It’s sad.”
Within days, Pulte was celebrating a government initiative as a “game-changer”: the idea of a 50-year mortgage, floated as something to make housing more affordable. Several projections cast doubt on that idea, including a UBS calculation that a 50-year mortgage would save about $119 on a monthly mortgage bill, but the interest costs would be roughly double over the life of the loan compared to a 30-year mortgage.
“It is tempting to think of affordability as another version of the ‘cost of living crisis’—but affordability is subtly different, and may linger,” Donovan at UBS said.
