Fewer Immigrants, Higher Prices

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6 min read

Severe immigration policies only worsen labor shortages that are now driving up housing costs.

Walk by any construction site in a major U.S. city, and you’ll hear one of the great instruments in the symphony that is modern urban American life. It seems that no matter the day or the hour—it could be 6am on a Sunday—these unfinished structures will emanate with the cacophony of boots stomping, saws cutting and nail guns popping. And bouncing off the plywood walls above all this sound are workers barking out instructions to each other—often in Spanish.

This observation, which is common nationwide and almost uniformly the case in cities, like Houston and Los Angeles, speaks to a fundamental fact about America’s housing industry: it is greatly influenced by immigrants. According to statistics from the National Association of Home Builders (NAHB), immigrants—who are 13 percent of the population and 16 percent of the labor force—make up 23 percent of the construction workforce, an increase of three percentage points since 2004. In Texas and California, these figures hover around 40 percent. Over half of these immigrant construction workers are from Mexico, and over 80 percent are from Latin America.

Just as well, this speaks to an under-reported factor of America’s affordable housing crisis. If these Latin American workers cannot enter the country because of tough immigration laws, it will create labor shortages and increase construction costs, raising prices for buyers. According to recent reports and industry experts I spoke with, this is already happening.

The dilemma, said Jerry Howard, CEO of the NAHB, intensified during the recession. A rapid decline in housing starts caused jobs to dry up, leading to shifts in the workforce. Domestic construction workers, who were tired of the industry’s low pay and cyclical nature, sought more stable employment in other industries, or went to college. Even with national housing starts ticking up each year since 2010, much of this blue-collar American workforce hasn’t returned to construction.

Foreign-born workers, meanwhile, returned to their native countries to reconnect with their families. In the years since the recession, some of those countries’ economies have improved, discouraging a return. It hasn’t helped that the U.S. approach to immigration—in both policy and rhetoric—grew more severe in recent years.

Under President Obama, there were more deportations than any other U.S. president, causing him to be dubbed “deporter in chief.” These attitudes have only worsened under President Trump, with his directives to build a wall and form a deportation task force.

This has not reduced the foreign-born population in net terms; it has continued to increase since 1970. But migration by Mexicans—again, far and away the largest percentage of foreign-born construction workers—has been negative, with 140,000 in net terms leaving the U.S. between 2009 and 2014. It’s doubtful, under the current administration, that these trends will change, and even the immigrants who remain—many of whom are undocumented and can’t acquire visas—are hesitant to fully engage in the workforce.

“There’s a fear factor with Trump that’s a huge psychological barrier,” said Carol Galante, former HUD Assistant Secretary for Housing/FHA Commissioner and now an urban policy professor at the University of California-Berkeley. “It’s the fear that you’re going to get swept up when you go to work.”

These factors have had the effect—along with low unemployment rates and increased housing activity—of causing labor shortages. This was explained in another NAHB report in 2016.

“A survey of single-family builders,” it read, found that “the share of builders reporting either some or a serious shortage has skyrocketed from a low of 21 percent in 2012, to 46 percent in 2014, 52 percent in 2015, and now 56 percent in 2016.”

This included labor that developers employed directly, although the shortages were even more pronounced in the subcontractor market. For example, 48 percent of builders surveyed said that there was “some shortage,” and 19 percent claimed a “serious shortage,” of bricklayers in their respective markets. And builders said overwhelmingly—by 64 percent or more—that this was delaying projects, driving up wages and bids, and increasing housing costs. It’s worth noting that over that same 2012 to 2017 period, America’s median home prices have jumped from $151,000 to $196,000. The spikes have been the worst in large cities that rely more on immigrant labor.

“I hear consistently from developers that prices of the subcontractor bids partly are going up because subcontractors are so busy because of a labor shortage,” said Galante, speaking of the Bay Area market. In the most extreme cases, it delays projects for months on end. This was echoed by Rick McGuire, a Lubbock-area developer who said all parts of Texas—rural and urban—have been impacted.

“The recession we experienced six years ago is the biggest factor because a lot of people left the workforce,” said McGuire. “But certainly I do think immigration has something to do with it.”

Of course, housing is not the only industry that disproportionately uses immigrant labor, so it is not the only one that would suffer higher prices in a less open America. Immigrants represent an equal or higher share of the labor force for food services (23 percent), agriculture (24 percent), and warehousing (27 percent), and nearly half of in-home service workers, ranging from janitors to caretakers.

These facts, said Howard, the NAHB CEO, should impel Congress to finally agree on comprehensive immigration reform. And he said that such reform should err on the side of allowing in more law-abiding immigrants. One path to this, he said, would be to redefine construction work as “skilled labor,” so that America’s builders wouldn’t have to keep facing these shortages.

“America as a whole has been built on the backs of immigrant labor,” Howard said. “The construction industry has always been one of the first rungs on the economic ladder for immigrants.”

And the industry needs these immigrants just as much in return. As more domestic Americans seek different careers, immigrants have proven to be the wellspring for builders to find this cheap labor—or any labor period.