SouthernWorldwide.com – A recent working paper from the Federal Reserve has indicated that the significant increase in illegal immigration during the Biden administration has contributed to rising home prices and rental rates across the nation.
This study emerges as immigration continues to be a focal point in political discussions. Republicans argue that President Biden’s border policies have placed a strain on housing and public resources. Conversely, Democrats suggest that immigration helps alleviate labor shortages and supports economic expansion.
The Federal Reserve Bank of Dallas published this new report, which is one of the first comprehensive efforts to quantify the impact of the unprecedented wave of illegal migration between 2021 and 2024 on local economies and labor markets. It was compiled using individual immigration court records and government administrative data.
A PROBLEM HIDING IN PLAIN SIGHT IS KEEPING AMERICANS FROM BUYING HOMES
The authors have emphasized that this paper is a preliminary draft intended for professional review and that its findings do not necessarily represent the official views of the Federal Reserve Bank of Dallas or the broader Federal Reserve System.
Researchers discovered that the influx of illegal immigrants positively impacted local employment with minimal discernible effect on wages. However, this came at the cost of increased housing demand, which subsequently drove up both home prices and rental costs.
The study found that inflows of undocumented workers led to a near one-to-one increase in local employment. Specifically, a 1% rise in unauthorized workers relative to a local area’s workforce corresponded with approximately a 1% increase in overall employment. The research did not find any evidence suggesting that this immigration surge led to a decrease in average wages.
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Despite stable wages, this 1% increase in the flow of undocumented workers resulted in a rise in local home prices by about 2.2% and rents by approximately 1.4%. The study also found limited evidence that new housing construction adequately expanded to meet this increased demand. Consequently, while wages remained relatively stable due to the immigration influx, housing prices and rents surged, making it more challenging for American workers.
The housing crisis has significantly affected affordability throughout the U.S. and is a crucial issue for voters on both sides of the political spectrum heading into midterm elections.
Researchers concluded that the influx of undocumented immigrant workers acted as a shock to housing demand in areas where supply was already constrained.
The authors argued that the increase in housing demand outpaced the pace of homebuilding in many regions, exacerbating price pressures in markets with already limited housing supply.
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Economists estimate that the flow of undocumented workers accounted for approximately 30% of employment growth in the average local labor market between March 2021 and March 2024.
They further estimate that these inflows were responsible for about 30% of the increase in home prices and roughly 20% of rent growth in the average metropolitan area during the same period.
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These findings suggest that the recent surge in immigration had varied effects across different sectors. It expanded the labor force without significantly impacting wages but simultaneously increased demand in housing markets where supply struggled to keep pace. These estimates pertain to the average metropolitan area studied and do not imply that immigration was the sole cause of rising housing costs nationwide.
The paper characterizes the period between 2021 and 2024 as an “unprecedented boom” in illegal immigration. Citing estimates from the Congressional Budget Office, the authors noted that net unauthorized immigration added approximately 7 million people to the U.S. population during this timeframe, with a notable slowdown beginning in mid-2024.
The researchers also analyzed government spending and observed that areas experiencing greater increases in unauthorized immigrant workers saw a decrease in government transfer payments.
They suggested this observation might indicate stronger employment rates and reduced reliance on safety-net programs among working-age immigrants, while acknowledging that this finding differs from some previous research based on surveys.
Read the full report here:
