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Housing Perspectives

Research, trends, and perspective from the Harvard Joint Center for Housing Studies

The Role of the Recent Immigrant Surge in Housing Costs

The recent surge in immigration has sparked a policy conversation about the role of immigrants in the housing market, particularly when it comes to housing costs. This has taken on a particular urgency in the context of the ongoing affordability crisis, in which half of renters are cost burdened and many people are getting priced out of homeownership. The timing of the recent surge in immigration, however, does not line up with the high growth in both rents and home prices that happened at the start of the pandemic. Immigrants play a role in household growth, sometimes to a substantial degree, but housing demand during the pandemic has been primarily shaped by native-born household growth in a time of constrained housing supply. So what does the data tell us about the role of immigrants in housing demand (and supply) during the recent period of rapid growth in housing costs?

It is true that immigrants play an important role in household growth and housing demand, though the share of growth from immigrant households fluctuates over time, largely driven by variations in native-born household formation. For example, foreign-born householders accounted for 50 percent of household growth from 2010–2015 amid weak native-born household formation after the Great Recession, according to American Community Survey (ACS) data. As native-born household formation increased leading up to the pandemic, foreign-born households accounted for 23 percent of household growth from 2015–2019.

When rents and home prices spiked after the onset of the pandemic, immigrants were still not driving household growth. Foreign-born householders accounted for 25 percent of household growth from 2019–2023 amid particularly strong native-born household growth (Figure 1). As a result, 16 percent of all households (21 million) were headed by an immigrant in 2023. It should be noted that these numbers from the ACS include both documented and undocumented immigrants.

Figure 1: Pandemic-Era Household Growth Driven by Native-born Households

This figure shows growth in households by nativity from 2010-2023, broken into segments of 2010-2015, 2015-2019, and 2019-2023. It shows that foreign-born household growth matched native-born household growth from 2010-2015, but fell far below native-born growth in the other periods. 2019-2023 in particular was marked by very high native-born household growth.

Source: JCHS tabulations of US Census Bureau, American Community Survey 1-Year Estimates (2010-2022 via IPUMS-USA, University of Minnesota).

It is certainly true that the number of immigrants who arrived in the most recent surge in 2022 and 2023 was historically high. The CBO estimated that the level of immigration surged from an average of 990,000 in 2020 and 2021 to 2.7 million in 2022 and 3.3 million in 2023. However, the timing of this surge does not line up with the substantial increase in home prices and rents of recent years (Figure 2). Home prices surged in both 2020 and 2021, and rents reversed a slight drop in 2020 with a sharp increase in 2021. After immigration ramped up in 2022, growth rates of house prices and rents slowed substantially. By 2023, as the surge in immigration continued, home price growth fell even further while rent growth completely stalled.

Figure 2: The Surge in Home Price and Rent Growth Predates the Surge in Immigration

This figure shows year-over-year Q4 change in home prices and rents, compared to annual immigration levels, from 2011-2023. It shows that early in the pandemic, in 2020 and 2021 especially, home prices and rents spiked, as immigration levels were typical. As immigration surged in 2022 and 2023, home price and rent growth both slowed substantially.

Notes: Asking rents are for professionally managed apartments in buildings with five or more units.
Source: JCHS tabulations of RealPage data; S&P CoreLogic Case-Shiller US National Home Price Index; and CBO’s 2024-2054 Demographic Outlook.

So if not immigration, what explains the dramatic rise in housing costs? One major factor in demand was the historically large millennial generation (born 1980–1994) being at prime homebuying ages (aged 26–40 in 2020) with years of pent-up demand from delayed household formation after the economically damaging effects of the Great Recession. The nature of the pandemic also sparked demand for housing with more space, especially for those working remotely, which contributed to more people forming their own households and moving to larger homes or apartments.

Additionally, Federal Reserve rate cuts after the onset of the pandemic resulted in a historically low 30-year mortgage rate, which dipped below 3.5 percent in April 2020 and bottomed out at 2.65 percent in January 2021. This motivated a spike in housing demand among those wanting to take advantage of the lower rates and the greater purchasing power they provided. The heightened demand from these factors quickly clashed with the country’s constrained housing supply, which remained at insufficient levels after years of underproduction following the Great Recession. These forces combined to put enormous pressure on home prices as well as rents, as the growing number of renter households competed for limited rental stock.

Additionally, while immigrants add to housing demand, they also help expand the supply of much-needed homes given their outsized role in the construction industry. Immigrants accounted for 34 percent of those who worked in construction trades in 2023, far higher than their 18 percent share of the overall workforce, according to ACS data. This share was highest in the West and the South, where immigrants accounted for 40 percent of all workers in construction trades. The states with the highest shares of immigrants in construction trades included California (52 percent), New Jersey (52 percent), Texas (51 percent), Maryland (50 percent), and Nevada (48 percent). The occupations with the highest shares of immigrant workers included plasterers (61 percent foreign born), drywall installers (61 percent), roofers (52 percent), painters (51 percent), and carpet/floor/tile installers (45 percent).

In the long term, population and labor force growth are key drivers of a healthy economy and expanding economic opportunity. However, given the aging of the historically large baby boom generation and the declining birth rate, natural population change (births minus deaths) in the United States is projected to become negative by 2040. At that point, the country will be wholly dependent on immigration for population growth. While the recent surge in immigration is difficult to absorb in the short term, immigrants are and will continue to be an important source of future economic growth. Absent immigration, household growth will slow markedly over the next decade, significantly dragging down economic growth, as our forthcoming household projections will show.