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Advocates of immigration reform argue it will build housing demand and invigorate home prices, but the jury is still out as to just how much of an impact increased Immigration will have on future housing demand.

Does Immigration Raise Home Prices?

Advocates of immigration reform argue it will build housing demand and invigorate home prices, but the jury is still out as to just how much of an impact increased Immigration will have on future housing demand.

A recent blog post by Jessica Dill, senior economic research analyst in the Atlanta Fed”s research department, explores new research on how immigration affects housing demand.

According to a September 2010 working paper by the Joint Center for Housing Studies at Harvard, an increase of between 11.8 million and 13.8 million households, depending on whether you use low- or high-immigration assumptions, is projected between 2010 and 2020, she wrote.

Likewise, Dowell Myers and John Pitkin prepared a report earlier this year for the Research Institute for Housing America projecting an increase of 12.8 million households between 2010 and 2020, of which immigrants account for 4.12 million, or 32.2 percent. Looking back to previous decades, Myers and Pitkin note that the 4.03 million immigrant households that arrived between 2000 and 2010 accounted for 35.9 percent of the growth in households, while the 4.36 million immigrant households that arrived between 1990 and 2000 accounted for 31.8 percent.

“While it is nice to have a range in mind for how many immigrant households we can expect, it is only meaningful if it is accurate,” she said. “So how accurate are these projections? It depends on immigration policy discussions and the pending legislation on immigration reform.”

More recently, in October 2013 the Bipartisan Policy Center released a report with analysis that “demonstrates that…fixing our broken immigration system will benefit online casino australia our economy.” The sensitivity analysis measured the impact of reform to immigration policy on the housing market and found that “demand for housing units increases as new immigrants enter the economy and form households, accelerating the current housing recovery and fueling growth in this sector of the economy.”

Jacob Vigdor, professor of public policy and economics at Duke University, has also looked into the impact of immigration. In a report released by the Partnership for a New American Economy and the Americas Society/Council of the Americas in September 2013, Vigdor estimates that each immigrant adds 11.6 cents to the price of the average home.

Vigdor also found that the effects of immigration on house prices are strongest in the Sun Belt cities. Second, he concluded that immigrants tend to avoid places with the worst housing affordability problems. Third, Vigdor found that immigrants often revitalize less desirable neighborhoods in costly metropolitan areas. And lastly, he pointed out that immigration has stabilized declining rural areas and stanched the decline of Rust Belt cities. For more detail on these and other findings, check out a video clip of Vigdor”s presentation of findings to an assembly of Atlanta Fed real estate business contacts.

It is worth noting that Vigdor was not the first to find that an inflow of immigrants causes house prices to rise. In a 2006 Journal of Urban Economics article, Albert Saiz demonstrated that an inflow of immigrants increases demand for housing, thereby causing rents and house prices to rise. Specifically, Saiz found that “an immigration inflow that amounts to 1 percent of the initial metropolitan area population is associated with increases in housing values and rents of about 1 percent,” Dill wrote.

This increase in house price provides some benefit to existing homeowners, but the corresponding increase in rents has negative consequences for renter households, causing some to move away from the area.

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