The Real Estate Case for Immigration

More restrictive residency policies can have widespread effects on housing markets.

Immigration is among the most hotly debated issues in America right now, but regardless of the political arguments about how to manage the country’s borders, there’s no denying that an uptick in foreign residents in the U.S. is a boon for real estate, according to Alex Nowrasteh, immigration policy analyst with the Cato Institute’s Center for Global Liberty and Prosperity. 

“No other market is more affected by immigration than real estate,” Nowrasteh said at a session called “Housing Markets Are International” at the REALTORS® Legislative Meetings & Trade Expo. “The effect of immigration on the labor market is, at worst, one-tenth the size that it is on real estate.” He noted that immigrants gravitate toward construction jobs at a much higher rate than American-born citizens. When immigration rates increase, the homebuilding industry may benefit. 

Nowrasteh also said Cato Institute research has shown that on a local level, a 1 percent rise in the immigrant population corresponds to a 1 percent hike in rental rates. And with 22.6 percent of the U.S. population—or 43.3 million people—being foreign-born, according to Census Bureau data, the economy is getting a huge influx of cash. In 2012, Nowrasteh noted, immigrants added $3.1 trillion to U.S. housing wealth, mostly in mid- to low-income counties. 

Policies that tamp down immigration will tend to have a negative effect on housing, Nowrasteh said, using a controversial Arizona law as an example. The Legal Arizona Workers Act, which was enacted in 2007, aims to crack down on employers who hire undocumented workers and force illegal immigrants out of the state. Between 2008 and 2010, about 100,000 residents left Arizona, resulting in a 16 percent decline in foreign-born residents, Nowrasteh said. During that same time period, rental vacancy rates soared from 9.8 percent to 16.8 percent. 

The exodus wasn't the sole reason for skyrocketing housing vacancies given that it took place in the midst of the last housing crisis, Nowrasteh noted. But it definitely compounded the problem, he said. “A shrinking population decreases housing prices, period. If you want to increase housing prices, the number one things you can do is increase the population.” 

Also during the session, Danielle Hale, managing director of housing statistics for the National Association of REALTORS®, revealed NAR’s latest research on international buying activity in the U.S. in 2016. These are some of the highlights: 

  • Foreign buyers purchased $102.6 billion worth of U.S. real estate. 
  • While the majority of foreign buyers typically reside outside the U.S., 2016 was the first year that more were living inside the country. 
  • Following the trend of the last few years, China again represented the largest share of foreign buyers in the U.S., followed by Canada, the United Kingdom, India, and Mexico. Buyers from Canada and the UK were most likely to reside primarily outside the U.S. 
  • The average price of a property purchased by a foreign buyer was around $477,000, while the average national home price was $260,000.
  • Florida, California, Texas, Arizona, and New York were the most popular states for both foreign buyers and sellers.