Of Course Illegal Immigration is Driving up the Cost of Housing

FAIR Take | September 2024

Regardless of who is elected president in November or which party assumes control of Congress, there are certain immutable laws that lawmakers will be forced to face. One of those is the law of supply and demand.

As the 2024 political campaign unfolds, two of the top concerns for American voters have been mass illegal immigration and skyrocketing costs of life’s essentials – particularly the cost of housing. The Republican nominee, former President Donald Trump, sees these two issues as being intertwined, i.e. that large-scale illegal immigration is a significant factor in soaring home-buying and rental costs. His Democratic opponent, Vice President Kamala Harris, has talked about both issues, but has not connected the two.

Mass immigration is not the only factor making housing unaffordable for many people, but that immutable law of supply and demand is hard to ignore. In Fiscal Year 2023, some 3.2 million illegal aliens entered the United States illegally. According to Homeland Security Secretary Alejandro Mayorkas, upwards of 85 percent of those people, about 2.72 million, were released into the United States. Another 1 million or so legal immigrants settle here each year, while the number of people issued temporary work or student visas tops out at well over a million.

All of these people need a place to live. In 2023, about 1.4 million new housing units were completed – 90 percent more than just a decade earlier. But given the volume of immigration and younger Americans trying to buy a home (only half of millennials and a quarter of Gen Z-ers are homeowners), demand is outpacing supply.

Governments (primarily at the state and local level) can take some actions to boost the supply of housing, such as reducing bureaucratic red tape and streamlining the permitting process. Other factors, such as the soaring costs of materials needed to build a house or an apartment building, including the cost of borrowing money, are harder to manage. The average cost to construct a new single-family home is now $392,000 – about $100,000 more than it was in 2019.

In contrast, government has far more control over the demand side of the equation. The U.S. population has grown by about 6 million people in the four years since the completion of 2020 Census. Immigration – both legal and illegal – has been the driving force behind that rapid growth. The Center for Immigration Studies estimates that in just the first year of the Biden-Harris administration, immigration accounted for at least 80 percent of U.S. population growth. According to the Census Bureau’s population clock, the U.S. nets an additional migrant every 27 seconds.

Economists have recognized how mass immigration increases the cost of housing. In April, the left-leaning journal The Economist published an article that discussed rental housing in particular. The author specifically points to research conducted by Goldman Sachs which found that in Australia, each 100,000 increase in annual net migration increases rents by about 1%. It also points to a December 2023 paper published by the Bank of Canada which noted that the immediate effects of the rise in immigration to Canada is inflationary. This is backed up by evidence from other sources, including Mexico’s southern border where migrants from other parts of Latin America drove up prices for local residents.

Thus, curbing mass immigration would alleviate one of the biggest – if not the biggest – factor driving the ever-increasing costs of owning or renting a home. In his speech to the Economic Club of New York last week, former President Trump laid out positions that go beyond reducing the influx of new illegal immigration. In that speech, Trump called for barring illegal aliens from obtaining home mortgage loans, as well as reiterating his pledge to substantially increase the numbers of illegal aliens who are deported from the United States. Such moves would reduce the demand for housing (either because few, if any, illegal aliens could purchase a home without a mortgage, or because they are no longer in the country), making it easier and more affordable for others looking to buy a home or find an affordable rental unit.

Vice President Harris has also put forth a plan to make homeownership more affordable, such as giving first-time buyers $25,000 toward their down payment, tax breaks for builders, and urging local governments to speed up the permitting process. To date, she has not directly addressed the demand side of housing unaffordability or the role of immigration in driving it. And while she now speaks of the need to secure our borders, her three and a half years as “Border Czar” have been marked by historic levels of illegal immigration – with no plan to remove any of them.

Like every social and economic issue, making housing more affordable for Americans is a complex one for which there is no magic bullet. But just because there is no neat, comprehensive answer to the problem does not mean that there aren’t commonsense steps that can be taken to make the problem less severe. Of all of those steps, reducing the immigration-driven demand for housing would produce the most immediate results.