Impact of Illegal Immigration on Housing Prices and Employment
A recent Federal Reserve report indicates that the unprecedented rise in illegal immigration during the Biden administration has significantly affected the political discourse around soaring home prices and rents.
With immigration remaining a key issue, Republicans suggest that Biden’s border policies are straining housing and public resources. In contrast, Democrats argue that immigration could alleviate labor shortages and foster economic growth.
This new study from the Dallas Fed, which analyzes individual immigration court records alongside government data, is among the first to gauge how the surge in illegal immigration from 2021 to 2024 influenced local economies and labor markets.
Rising Home Prices Amid Immigration Surge
The authors point out that while the report is a preliminary draft meant for expert review, it sheds light on notable findings. The influx of illegal immigrants enhanced local employment, yet it also fueled demand for housing, causing spikes in both home prices and rents.
Specifically, the data shows that a 1% rise in undocumented workers corresponds to a 2.2% increase in home prices and about a 1.4% jump in rents. Interestingly, this population increase didn’t seem to adversely affect average wages.
The Housing Crisis
Despite stable wages, the demand-supply imbalance in housing remains a pressing concern. The study suggests that the surge in undocumented workers acted as a “housing demand shock” at a time when available housing was limited. This situation contributes to heightened price pressures across the nation.
Economists estimate that these undocumented immigrant workers accounted for about 30% of employment growth in local labor markets from March 2021 to March 2024. This population influx also explains roughly 30% of the home price growth and about 20% of rent increases during the same timeframe.
While the increased immigration has expanded the workforce, it hasn’t led to a corresponding rise in wages, which could have alleviated some pressures on the housing market.
The report notes that from 2021 to 2024, the U.S. witnessed “unprecedented” growth in illegal immigration, adding an estimated 7 million people to the population. However, this trend began to sharply decline around mid-2024.
The study also examined government spending, revealing that areas with significant increases in undocumented workers experienced lower government remittance payments. Although these findings contrast with some previous studies, they may reflect a decrease in reliance on safety net programs by working-age immigrants.
