Last week, two Vice Presidential candidates went head-to-head on the debate floor: Republican J.D. Vance and Democrat Tim Walz. As two Midwesterners, the debate has been the most civil during a U.S. election cycle in a while. One of the topics that they debated was immigration. More specifically, J.D. Vance claimed during the debate that "you have got housing that is totally unaffordable because we brought in millions illegal immigrants to compete with Americans for scarce homes." It makes for an interesting form of interdisciplinary politicking because Republican politicians tend to harp on immigration. Plus, housing costs rising relative to income (see Harvard data below) is a concern for those who are struggling to "live the American Dream," thereby making his assertion more palatable to voters. I have to wonder how true Vance's claim is.
Intuitively, it sounds plausible. Housing supply has become more constrained in recent years. I pointed out that reality in 2017 when criticizing land use regulations. There has been an increase in unauthorized border crossings since the pandemic. There is a report from the U.S. House Judiciary Committee that points out that there have been 5.6 million crossings from January 2021 from August 2023.
Conversely, as I pointed out last year when scrutinizing Trump's Title 42, the number of repeat crossings increased considerably under Title 42. Pew Research found that the number of unauthorized immigrants in the United States increased from 10.2 million in 2019 to 11.0 million in 2022.
With an increase in population, it puts stress on an already constrained housing market that cannot expand quickly. After all, immigrants need a roof over their head like everyone else because they are human beings deserving of dignity, too. An increase in demand increases costs, which is a reality you can find in an Econ 101 textbook.
As the Cato Institute points out, "Even immigrants who work in construction increase housing demand first before they can construct more housing. That increase in demand drivers up prices and incentivizes new supply through further construction, renovation, or increasing the supply of rental units through other means." Two questions that come to mind are "Does immigration drive up housing prices in the long term?" and "How much of an impact does immigration have on housing versus other factors?"
Similar to other markets, there are multiple factors that contribute to rising prices. To name a few that come to mind: high housing demand; low housing supply caused by such government obstruction as land use regulation, zoning laws, and permitting delays; inflation in the construction industry and economy generally; stagnant wage growth; the mortgage interest deduction; increased mortgage rates; and rent control in certain U.S. cities. Going back to the Cato Institute, "over 90 percent of housing prices comes from other economic factors and immigration has become less important since 2015."
While the undocumented immigrants increase the demand, they also contribute to the housing supply. According to the Bureau of Labor Statistics, 25.3 percent of construction laborers are foreign-born, which is higher than the 16.8 percent for the entire labor market. It is higher in other parts of the country. Per National Association of Home Builders data, that foreign-born percent is 40 percent in California and Texas; 37 percent in Florida, New Jersey, and New York; and 33 percent in Nevada.
As such, it would not be surprising to find research from professors at the University of Wisconsin-Madison and University of Utah showing that deporting undocumented construction workers worsens the housing shortage (Howard et al., 2024). This finding of "immigration lowers housing prices in the long-run" is confirmed with research from the United Kingdom (Braakmann, 2013; Sá, 2011) and Italy (Accetturo et al., 2014). Economically speaking, that finding makes sense and it is another reality you can find in an Econ 101 textbook. When you reduce the number of available workers, the price of construction increases. The increased construction costs reduce residential housing output, thereby exacerbating the housing shortage.
Postscript
To conclude, is Vance correct in saying that immigrants contribute to increasing housing prices? Yes, because an increase in demand increases costs. However, he is only correct to a point. Immigrants contribute both to the demand and the supply of housing. Immigrants help fill these labor shortage gaps, whether it is in construction, healthcare, agriculture, or other service-based industries. When you reduce the supply of labor, you end up increasing prices of the good or service in question. Plus, there are other factors that act as larger drivers of the increasing housing prices.
On some level, Vance is technically correct, but not nearly as much as he or anti-immigration nativists think. As research organization New American Economy illustrates, immigrants have created $3.7 trillion in housing wealth, thereby stabilizing less desirable communities that would have otherwise declined. All this research reminds that whether it is in the housing market specifically or the economy more generally, immigrants creates more benefits than they produce costs.
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