A recent study by the Dallas Federal Reserve indicates that the significant increase in unauthorized immigration during the Biden administration contributed to rising housing costs, a point highlighted by former President Donald Trump. However, the research also suggests that other economic factors played a more substantial role, and experts caution against reducing immigration as a solution to housing affordability issues.
The study found that between early 2021 and early 2024, unauthorized migration pushed up average home prices by 6.6 percent and market rents by 4.3 percent across U.S. municipalities. Former President Trump cited a working paper from the Federal Reserve, stating that the "Biden illegal immigrant wave drove up home prices 30%." The Dallas Fed paper, however, clarifies that this figure is an overstatement of its findings.
During the period examined, an estimated seven million unauthorized immigrants settled in the United States, averaging 1.75 million per year. This surge is significantly higher than the average of 0.1 million unauthorized migrants per year seen between 2000 and 2019. Researchers at the Dallas Fed analyzed how local economic trends varied in areas with different levels of migrant settlement.
While the study found that immigration contributed to increased housing costs, it also noted that other factors were more significant drivers. These include tight post-pandemic labor markets, rising construction material costs, increased demand for larger living spaces due to remote work, and a pre-existing shortage of housing in the U.S.
The paper also indicated that, contrary to some claims, the immigration surge did not negatively impact wages or job opportunities for American-born citizens. Instead, it suggested that immigrants create demand for goods and services, thereby contributing to job growth. Furthermore, the study found that unauthorized immigrants tend to pay more in taxes than they receive in social welfare benefits, partly due to their ineligibility for programs like Social Security and Medicare.
Experts argue that while the housing cost increase is a real concern, throttling immigration is not the appropriate response. They point out that immigration generally benefits the U.S. economy by fostering a more efficient division of labor, increasing productivity, and helping to offset the economic challenges posed by an aging population and a declining worker-to-retiree ratio.
The analysis suggests that even during a period of high unauthorized immigration, immigration itself accounted for only 30 percent of the increase in home prices and 20 percent of the rise in market rents. This underscores the significant role of other market dynamics.
To address housing affordability, the study and related commentary emphasize the need to increase housing supply by reducing barriers to homebuilding, such as restrictive land-use regulations. This approach, experts contend, would allow the U.S. to benefit from immigration's economic advantages while mitigating its more modest downsides, such as localized increases in housing costs. Rapid and disorderly surges in immigration are identified as politically and economically disruptive, even in markets with adequate housing supply.