A Cato Institute scholar makes a point that is not being readily recognized in the issue of housing and the impact of immigrants. While immigrants do increase the demand for housing, immigrants also, disproportionally, comprise most construction workers who build new houses.

Alex Nowrasteh, vice president for economic and social policy studies at Cato, states that like all supply and demand issues, increased demand from immigrants will increase housing prices. He said, “Housing supply is relatively inelastic in many places, partly because of government policies like zoning and height restrictions and urban growth boundaries. Land use liberalization could make the housing supply more elastic, but the housing supply will not become perfectly elastic even if all land use laws are abolished. That means that higher demand, all things equal, will drive up prices and the quantity of housing.”

Nowrasteh advises, “The government should not seek to increase, reduce, or stabilize housing prices in the United States. It should merely respect property rights for land use and get out of the way to allow housing supply and housing demand to equilibrate to prices that change as the world does.”

Immigrants contribute to the increase in housing supply because 14.9 percent of noncitizens labor in the construction industry, according to the 2023 American Community Survey. Only 6.2 percent of native-born Americans work in construction. “Estimates show that about 30 percent of all construction workers are immigrants, with higher rates in California, Texas, Florida, New York, New Jersey, and Nevada. Deporting those workers or halting more immigrants will reduce the growth in the housing supply.”

However, immigrants increase housing demand more than they increase housing supply. “…immigrants who work in construction increase housing demand first before they can construct more housing. That increase in demand drives up prices and incentivizes new supply through further construction, renovation, or increasing the supply of rental units through other means,” says Nowrasteh.

Nowresteh further points out “most of the debate over the economics of immigration is focused on wages, which are barely affected by immigration. . . housing is the market where prices are most affected by immigration. . . the marginal immigrant affects housing prices by a factor of 3 to 10 more than wages.”

[Of foreign born workers in the US, 50.4 percent are non-citizens, according to the Economic Policy Institute. Their average salary is $35,989.]

Because native born Americans, most of whom are in the middle class, own two-thirds of the housing most of the increase in housing wealth caused by immigration accrues to native-born Americans.

Nationwide the median sale price of a single-family home increased 46 percent  from August 2019 to August 2024. In general, this has made renters and first-time home buyers worse off and homeowners, who are mostly native-born, better off. There are different ways to analyze the increase in housing prices, points out Nowresteh:  the price per square foot as a share of income is flat but houses are bigger than they used to be, and the real price per square foot is up nationwide.

For government to “get out of the way” would require state and local governments to eliminate zoning and land use policies and for the federal government to leave the mortgage business, among other changes.