2 weeks Ago By Realtor.com
President-elect Donald Trump has said that his plan to deport millions of undocumented immigrants will solve the nation’s housing crisis. Housing industry experts say the reality is more complicated. On the campaign trail, Trump repeatedly pointed to illegal immigration as the cause of high housing costs, vowing that his plan to carry out “the largest deportation operation in American history” would lower home prices.
Immigration “is driving housing costs through the roof,” Trump said at a September rally in the swing state of Arizona. Following his election victory last week, Trump announced his plan to appoint Tom Homan as his “border czar” in charge of deportations. Homan, the former acting director of Immigration and Customs Enforcement during Trump’s first term, has made clear his tough stance in favor of widespread deportations of people living in the U.
S. illegally. Trump also signaled his seriousness about carrying out an immigration crackdown with his selection of Stephen Miller as deputy chief of staff for policy.
Miller served as a senior adviser and speechwriter during Trump’s first stint in the White House, and is an outspoken immigration hard-liner. Deportations could affect the construction workforce The Department of Homeland Security estimates that there are about 11 million unauthorized immigrants residing in U.S.
, although Trump and his supporters argue the number is much higher, possibly as much as double the official figure. Trump has argued that deporting many or all of those people will reduce housing costs for Americans, by reducing competition for homes. But economists and housing industry experts warn that widespread deportations could make new homes more expensive, by driving up labor costs.
“Mass deportation would seriously dampen the residential construction labor force. Not only would builders have to replace workers, which takes time and money to do, but they’d likely have to pay more for replacement labor in the future,” says Realtor.com® senior economist Joel Berner.
“This, combined with the looming threat of tariffs on construction materials, would drive up construction costs considerably and make new homes more costly. Builders have been doing a good job of offering less expensive homes lately, but that positive development would be jeopardized,” says Berner. Construction is the industry that employs the most undocumented workers, at 1.
5 million, according to estimates from the Center for Migration Studies of New York, a pro-migrant think tank. If accurate, that would mean undocumented immigrants account for about 15% of the national construction workforce. In some states, that share is much higher, with half of construction workers in Texas reportedly undocumented , for example.
Construction is an appealing sector for people without legal work status primarily because it relies on vast networks of subcontractors, who frequently pay workers in cash as independent contractors. Most real estate economists agree that a dire shortage of homes is the root cause of the nation’s housing affordability crisis. Residential construction activity plunged after the Great Recession, and has never recovered to the peak levels seen before that crisis began in 2007.
Now, various estimates put the total shortfall of housing units in the country at 1.5 million to more than 7 million. “Anything that provides a shock to the labor force could have significant implications on the home building industry and our labor supply, and add to housing affordability challenges,” says Jim Tobin, CEO of the National Association of Home Builders.
“We are already facing a labor shortage crisis, and that lack of skilled labor increases labor costs, slows down the pace of construction, and ultimately results in higher home prices.” A spokesperson for Trump did not respond to a request for comment on his immigration plans and their impact on the housing market. Few undocumented immigrants are homebuyers The evidence that immigration is a major factor in housing costs is mixed.
While there is reason to believe that higher immigration levels can drive up local rents in a city, the recent post-pandemic surge in home prices began before illegal immigration levels jumped . Undocumented immigrants living in the U.S.
are not qualified for conventional mortgages. However, they can purchase homes with cash or use an obscure, unconventional type of mortgage. Between 5,000 and 6,000 mortgages of this kind were issued last year, according to estimates from the Urban Institute .
At the high end, that would account for about 0.1% of all new mortgages issued for the year. “The number of homes that are purchased by undocumented individuals is not even a blip on a radar,” says Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals.
Conversely, Acosta points out that foreign buyers living outside the country bought about 54,000 homes worth $42 billion last year, according to National Association of Realtors® data . “That has a bigger impact on price points,” he says. “Subtracting a small number of undocumented people who are living here and working here, who may be in the homebuying marketplace, is not even going to be a fraction of that number.
” On the other hand, there is some evidence that undocumented immigrants, who are more likely to be renters than homebuyers, can affect local rents. Academic studies have found a 1% increase in a city’s population corresponds with a rent increase of about 1%. “Mass deportation would probably have more of a negative demand impact on the already soft rental market, which may end up enticing would-be first-time homebuyers to stay in their rentals and enjoy the lower costs,” says the economist Berner.
Over time, if renting becomes more attractive, it could ease demand in the homebuying market, eventually resulting in less pressure on home prices. However, Berner says that effect would take time to appear, and would not be an immediate impact of widespread deportations..
