Putting Research into Action

You may think being a Federal Reserve Bank president is all about numbers. It's true, we do spend significant time in Washington for Federal Open Market Committee meetings, discussing numbers, data, and interest rates.

Most of my time, however, is spent talking to people about how the economy is working - or not working - for them. Through these candid conversations, I learn about real-time, on-the-ground economic conditions in local downtowns and regions across the Third District. I previously wrote about how these insights help inform my monetary policy decisions.

Yet another equally important part of this job is understanding how the Philadelphia Fed can be a resource to and a collaborative partner with communities in our region. We do this largely through our Community Development and Regional Outreach Department. Our team often works closely with local partners - business leaders, elected officials, and community groups, among others - and makes plenty of data, expertise, and resources available to them to chart future courses for strong and inclusive economies. It truly is research put into action.

Certainly, there is no shortage of issues facing our communities. But the one that seems to prevail across the district, and even beyond, is the challenge families and workers face finding an affordable place to call home. I heard this specifically during a recent trip that took me to Altoona and Williamsport, Pennsylvania. And I heard it, too, when I visited the Federal Reserve's First District, based in Boston, in June 2024.

Housing costs remain a top concern for all of us. Very clearly, I hear from residents and families about the squeeze higher housing costs have put on their finances. But I also hear how this squeeze extends to their employment and career prospects - folks are removing themselves from job searches because they cannot find housing options near a job and in a community where they want, or can afford, to live. For small to midsize businesses, especially, housing costs are a barrier to attracting and retaining the skilled workers on which their local economies rely.

Research from the Philadelphia Fed is helping to put this challenge into perspective. But this work is also being put into the hands of policymakers, journalists, and concerned citizens.

For example, research by the Philadelphia Fed Senior Financial Economist Keyoung Lee and Quantitative Analyst David Wylie put hard data behind one of the issues raised in these community meetings - the observed increase in investor-owned rental housing and its impact on rents. On the ground, I have heard from many leaders that the rents in these homes were rising more quickly than in other rental properties. The research bore this out, showing that investor-owned rents have been rising at a faster rate than the market in general. Part of this increase can be attributed to new owners renovating and upgrading units prior to renting them back out, but the overall impact on rents is rather clear.

This issue with rents crosses over to another area of housing that has long served as a fixture of affordability, manufactured housing - often referred to as mobile homes, although that is a bit of a misnomer. Throughout much of this sector, individuals and families own their physical home but rent the land on which it sits.

Recent work by Eileen Divringi, community development research manager, takes a closer look at the challenges facing these families throughout the Third District. It is groundbreaking work, as data and research on this segment of the manufactured housing sector are extraordinarily rare. Several news outlets have highlighted this work, particularly in places like Pennsylvania and New Jersey, where owners of manufactured homes are feeling the pressures of these higher rents.

What we're hearing in the field mirrors what other renters are experiencing: new investors purchasing manufactured housing communities and increasing rents. For the individuals and families who looked at these homes as an affordable means toward homeownership, especially for older residents on fixed incomes who downsized from traditional homes, these new underlying land rent increases are becoming a threat to their financial well-being.

And since these homeowners don't actually own the land under their houses, they do not qualify for traditional mortgages. More often, they rely on personal property loans, which face less regulation and come at higher costs. For some, that creates a perfect storm of unaffordability in a segment that traditionally was heralded for its affordability. Eileen's work illustrates that these vulnerable homeowners can be found in nearly every region in the Third District and provides a critical foundation for further exploration of these trends.

I can understand if observers may be curious as to why we are studying housing. But understanding this sector and how it impacts people's lives is key to our work to achieve our dual mandate of stable prices and maximum employment for the American people. Housing rests on both of these pillars.

First, certainly, are housing costs. Housing inflation over the past two years has proven extraordinarily stubborn, helping to fuel higher-than-target inflation overall. But costs are only one part of our concern. Workers can't take jobs, and employers can't find workers, in areas where quality, affordable housing is scarce. And in the communities where I have visited, and many more from which I have heard reports, this scarcity of affordable housing has both workers and businesses in a state of unease.

Getting inflation back to our 2 percent target and our housing market back into a solid balance are crucial to the economic future of both our region and nation. Our research is helping to bring both the challenges and opportunities into clearer focus so that policymakers and economic and community leaders are armed with the data and ideas necessary to take the next steps together.

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