The Real Deal New York

Why immigrants are crucial to the housing market

Newcomers help raise value of homes in undesired neighborhoods like Morrisania and Canarsie

June 23, 2014 08:00AM
By Business Insider

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morrisania-and-canarsie

Immigrants help lift property values in neighborhoods like Morrisania

Immigration policy is one of the mostly hotly debated issues in the country.

From the perspective of the U.S. housing market, however, evidence shows that immigration is an extremely influential — and positive — factor. Immigrants create demand in the housing sector. They clear out undesired inventory. What’s more, immigrants often improve crime-ridden neighborhoods.

Immigrants create demand

When existing American homeowners sell their houses and buy new ones, they aren’t creating net new demand. Within the U.S. housing market, they are simultaneously becoming buyers and sellers. They fill one home by vacating another.

Immigrants moving in to the country, however, are creating net new demand for homes, either as renters or buyers.

The immigrant population is expected to grow by about 800,000 to 1 million people per year, Chris Porter at John Burns Real Estate Consulting told Business Insider, citing data from the U.S. Census Bureau’s population projection.

Home ownership among immigrants shouldn’t be ignored

Homeownership rates aren’t very high for new immigrants, especially relative to those born in the U.S. But over time, ownership rates for households where the head was foreign born can go up to 54-55%.

“Assuming that net immigration of 1.2 million … persists for 10 years, the model estimates that after ten years new immigrants will … account for more than 900 thousand home owners,” said the NAHB’s Natalia Siniavskaia in a 2012 paper.

The biggest obstacles to homeownership among immigrants is lack of assets and elevated uncertainty about how long they can be in the country, said Duke University professor Jacob Vigdor.

Because of this, new immigrants tend to be renters rather than buyers. In other words, they are expected to contribute more to multi-family construction in the near term, than single-family units. Obviously, wealthier immigrants have a more favorable impact on the demand for single-family units.

Immigrants fill obsolete houses and help raise values

As the U.S. housing market has recovered, supply has become increasingly tight. Of the available homes, an increasing share can be characterized as “obsolete,” said CoreLogic Mark Fleming. This refers to “properties that are no longer desirable because their characteristics do not match what buyers are looking for in a home.”

Immigrants have been helpful in clearing this undesired inventory. Importantly, they help to raise the value of homes in these undesired neighborhoods.

“Immigrants chose these neighborhoods because housing was least expensive, and they reverse the trends that led to inexpensiveness,” said Vigdor, a professor of public policy and economics. “By reducing vacancy, they reduce crime.”

He pointed out that immigrants have done this in the outer boroughs of New York like the Bronx, Brooklyn, and Queens. He points specifically to improvements in neighborhoods like Morrisania in the Bronx and Canarsie in Brooklyn.

Immigrants are sometimes blamed for crowding workers out of the labor market. But  jobs are also created by an increased demand for more homes and higher home values.

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