Immigrants Need Homes Too, So of Course They Push Up Home Prices
In his debate with Minnesota Gov. Tim Walz on Tuesday night, Ohio Sen. JD Vance, with characteristic directness, identified high levels of illegal immigration as a significant factor behind the soaring housing prices that have increasingly placed homeownership beyond the reach of many Americans. Vance argued that the unchecked flow of illegal immigrants has exacerbated competition in the housing market, intensifying pressures that are pricing out citizens who are simply trying to secure a place to call their own.
In his remarks, Vance trained his sights on Vice President Kamala Harris, faulting her for her role in an administration he asserts has allowed millions of illegal immigrants to enter the country. “We ought to be deporting illegal immigrants who are competing for these homes,” Vance declared, holding the administration to account for a housing crisis that is, in his view, largely of their making.
There really should not be much controversy over the idea that a surge in immigration puts upward pressure on home prices. Immigrants, just like everyone else, need housing. When there are more of them, demand for housing rises. And since they cannot bring a supply of houses with them when they cross the border, this pushes up homes prices.
Yet Vance’s claim prompted howls of outrage and a misguided fact check from the New York Times.
Robert Reich went so far as to call it “absurd” and “bigoted.”
The New York Times fact-checked this statement: “There’s a Federal Reserve study that we’re happy to share after the debate — we’ll put it up on social media, actually — that really drills down on the connection between increased levels of migration, especially illegal immigration, and higher housing prices.” Initially, they labeled it false but after further consideration it was upgraded to merely misleading.
Oddly, however, the fact check cites studies from Federal Reserve banks that support Vance’s claim:
“It is not clear what study Mr. Vance is referring to in his remarks. Some Federal Reserve officials and studies have suggested that immigration might push up home prices around the edges. A study by the Dallas Fed said that “the population influx could put upward pressure on rents and house prices, particularly in the short run before new supply can be built.” And the Minneapolis Fed president said that immigrants “need a place to live, and their arrival in the U.S. has likely also increased demand for housing.”
So, what was misleading? The Times says that the real problem with Vance’s point is that it is often raised by the wrong sorts of people.
“But most research that ties the cost of housing to recent immigration comes from groups that push for less immigration, like the Center for Immigration Studies,” the Times fact checker, an economics reporter for the paper, wrote.
This is what logicians would call an ad hominem attack. Just because research is done by groups that advocate for reduced immigration doesn’t mean it is flawed.
Liberals and Libertarians Say Immigration Raises Home Prices
In any case, it’s simply not true that most research tying home prices to immigration levels is done by immigration restrictionists. There’s a lot of research by progressive or libertarian organizations making the case that immigration pushes up home prices. Typically, this is framed as a defense of immigration as supportive of home values.
Furman helpfully links to a number of studies making this point, which we’ll briefly summarize.
A study by the Americas Society/Council of the Americas. and Partnership for a New American Economy found that the 40 million immigrants in the United States have “created $3.7 trillion in housing wealth.”
“They directly drive housing demand through their own purchasing power. The 40 million immigrants in the United States represent a powerful purchasing class—reflected by their demand for housing, as well as for other locally produced goods and services—that bolster the value of homes in communities across the country,” the summary of the study explains.
The Urban Institute‘s study found that “an increase in the number of immigrants equal to 1 percent of an MSA’s total population was linked with a 0.8 percent increase in rents and a 0.8 percent increase in home prices.”
Liberal economist David Card looked into the connection of immigrants and home prices in a 2006 paper cited by Furman.
“In this paper we document a strong positive association between immigration and average wages and price of houses of native individuals across U.S. states and metropolitan areas over the period 1970-2005,” the paper claims.
Alex Nowrasteh, immigration policy analyst with the Cato Institute’s Center for Global Liberty and Prosperity, has also argued that immigrants push up “housing wealth”—which is to say, home prices. Here’s how Realtor Magazine described his findings:
“No other market is more affected by immigration than real estate,” Nowrasteh said at a session called “Housing Markets Are International” at the REALTORS® Legislative Meetings & Trade Expo. “The effect of immigration on the labor market is, at worst, one-tenth the size that it is on real estate.” He noted that immigrants gravitate toward construction jobs at a much higher rate than American-born citizens. When immigration rates increase, the homebuilding industry may benefit.
Nowrasteh also said Cato Institute research has shown that on a local level, a 1 percent rise in the immigrant population corresponds to a 1 percent hike in rental rates. And with 22.6 percent of the U.S. population—or 43.3 million people—being foreign-born, according to Census Bureau data, the economy is getting a huge influx of cash. In 2012, Nowrasteh noted, immigrants added $3.1 trillion to U.S. housing wealth, mostly in mid- to low-income counties.
There are more studies here and here.
If you look hard enough, of course, you can find studies making the opposite claims. Some have shown the increased labor supply in the construction sector due to immigration creates additional housing supply, pushing down prices. But the notion that it is absurd, bigoted, false, or misleading to connect high levels of immigration to rising home prices is, well, absurd.
