Impact of Illegal Immigration on Housing Prices
A new report from the Federal Reserve highlights a significant increase in illegal immigration during the Biden administration, which has contributed to rising home prices and rents.
This issue remains divisive politically. On one hand, Republicans argue that President Joe Biden’s border policies have burdened housing and public resources. On the other hand, Democrats contend that immigration has played a role in addressing labor shortages and fostering economic growth.
The report, released by the Federal Reserve Bank of Dallas, merges data from immigration courts and government records to analyze how the wave of illegal immigration from 2021 to 2024 influenced local labor and housing markets.
The authors remind readers that this study is a preliminary version, intended for expert feedback, and doesn’t necessarily reflect the positions of the Dallas Fed or the broader Federal Reserve System.
The findings indicate that the rise in illegal immigration boosted employment, had minimal impact on wages, but resulted in a considerable increase in housing demand.
A 1% rise in temporary workers compared to the local workforce corresponded with about a 1% increase in overall employment. Interestingly, there’s no indication that this immigration surge has led to lower average wages. However, that same 1% increase in temporary workers was linked to approximately a 2.2% rise in home prices and a 1.4% increase in rents. The study suggests that home construction hasn’t kept up with the heightened demand, characterizing this influx as a shock to an already limited housing supply.
Economists believe that undocumented workers contributed to roughly 30% of employment growth, 30% of home price increases, and 20% of rent growth in average metropolitan areas from March 2021 to March 2024.
While these estimates are for average metropolitan regions studied, they don’t imply that immigration is the sole factor driving rising housing costs across the country.
The paper mentions an anticipated “unprecedented boom” in illegal immigration during the period of 2021 to 2024, quoting the Congressional Budget Office, which estimates that this net increase could raise the U.S. population by about 7 million people, although this trend is expected to decline sharply by mid-2024.
