Trump says deportations will lower housing costs. The reality is complicated.
11/09/2024 19:58
Donald Trump has blamed the housing crisis on immigration, but experts say the relationship between rising immigration and surging housing costs isn’t so clear.
On the campaign trail, President-elect Donald Trump blamed the housing crisis on immigration. As he tells it, millions of immigrants are pouring over the border and taking up scarce housing in a market that is already tight on supply and increasingly unaffordable for the middle class.
But housing market experts say the relationship between rising immigration and surging housing costs isn’t so clear. On one hand, immigrants, of course, need their own housing, and higher demand can make rents and home prices more expensive. On the other, immigrants disproportionately help contribute to new home supply because so much of the construction industry runs on their labor.
“When I hear about mass deportations or tighter border security, I think it could send a chilling effect through the immigrant population in the construction industry and therefore reduce the labor pool and drive labor costs up,” said Jim Tobin, president and chief executive officer of the National Association of Home Builders (NAHB), a trade group.
Ultimately, those policies can cause construction delays and make home prices higher for consumers, he added.
The NAHB estimates that immigrants make up around a third of the labor force in construction trades. In some states like California and Texas, the percentage is closer to 40%.
Read more: Why are home prices so high?
Ligia Guallpa, executive director of the Workers Justice Project, an organization that helps immigrant workers in New York organize and get educational training, said that many recent arrivals end up working in residential construction because it has few barriers to entry and strong labor demand. Many of those workers are living far from their job sites in cheaper parts of the city and may be sharing housing, she added.
“Very often where workers build are not places where they can afford to live,” she said. “We’re seeing communities and families coming together to be able to rent one apartment.”
Duewight García, 36, arrived in New York in 2019 from Honduras. After learning how to navigate the city’s regulations mandating that construction workers receive 40 hours of safety training before getting jobs, he found work in residential and commercial construction doing drywall installation and framing.
He said he wants to continue his education in the US but is concerned what Trump’s policies mean for immigrants.
“The policies that he has been talking about and that he’s begun to implement toward immigrants are really worrying,” García said in Spanish. “We really come here to work and contribute to the economy of this country, because we know that if this country is doing well, we’re going to do well.”
As for his own housing, García currently lives in a shelter in Elmhurst, Queens, after an electrical fire at his apartment.
A longtime shortage
Some homebuilders are taking a more sanguine approach to potential policy changes for now.
“For me, the idea to shut that vein off of potential labor doesn't make a lot of sense,” said Mike Forsum, chief operating officer and president at Landsea Homes, a residential builder based in Dallas. He said he’s not worried about how policy changes would affect his company’s ability to build going forward.
Landsea has been expanding rapidly amid the housing supply crunch and delivered 40% more homes in the third quarter compared to a year earlier.
“I don't see it materially affecting us in terms of our ability to move more houses,” he said.
Multiple factors have contributed to the US’s current housing shortage, including a steep dropoff in homebuilding following the 2008 financial crisis, restrictive zoning laws that limit new development, and demographic shifts that saw more than 70 million millennials enter their prime homebuying years.
Home prices and rental costs began a dramatic rise around the onset of the COVID-19 pandemic in 2020, when the Federal Reserve was forced to drop interest rates to near-zero and mortgage rates plunged, spurring millions of new homebuyers to enter the market.
Surging immigration came later, in 2022 and 2023, according to the Congressional Budget Office.
Some studies have suggested that rising immigration increases housing costs by around 1%. But past immigration crackdowns appear to have led to reduced housing supply around the country. A study by University of Utah and University of Wisconsin professors released this year examined an Obama-era immigration data-sharing program, Secure Communities, which gradually rolled out nationwide between 2008 and 2013 and led to more than 300,000 deportations.
The researchers found that three years after the program began, counties had lost roughly a year’s worth of residential construction on average, seeing more than 2,400 fewer building permits and about 2,000 fewer new homes on the market.
Trump’s program has the potential to be more sweeping. He hasn’t provided specifics on his plan, but has said he’d like to see deportations of millions. His other housing policy ideas have centered around deregulation and opening more federal lands to building, which generally garner more industry support.
“Any type of major pullback in immigration is going to affect the construction sector,” said Lisa Sturtevant, chief economist at Bright MLS.
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.
Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv.
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