Is immigration responsible for US housing prices as JD Vance claims?

The vice presidential debate between JD Vance and Tim Walz continues to be a hot topic. One of the central themes was immigration. Among other statements, the Republican candidate claimed that immigrants are part of the problem behind rising housing prices.

“You have got housing that is totally unaffordable because we brought in millions of illegal immigrants to compete with Americans for scarce homes,” Vance said in the debate.

The senator pointed to a Federal Reserve study that “drills down on the connection between increased levels of migration, especially illegal immigration, and higher housing prices.” How real is this? We explain.

Does immigration increase housing prices in the United States?

Undocumented immigrants represent only a small portion of the mortgage market because, without a Social Security Number (SSN), it is more difficult for them to obtain a loan or they are offered very high rates, which, in some cases, causes them to give up on proceeding with the process.

According to several economists who have studied the housing market, the factors driving the rise in housing prices are structural. The role of immigrants in rising housing prices is less clear.

While there isn’t much evidence that immigration increases housing prices, there is some data to suggest that an increase in immigration can increase rental costs slightly. CBS News cites a 2017 study that found that a 1% increase in a city’s population due to immigration resulted in a 0.8% increase in rental prices.

In this regard, economist Paul Krugman has noted on social media: “JD Vance claims that immigrants have caused the housing crisis. So much wrong with this, but one glaring problem is timing. The surge in rents (as measured by the BLS’s new tenant index) preceded the surge in immigration (as estimated by the CBO).”

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What has increased home prices in recent years?

According to CBS News, one of the biggest factors is a prolonged lack of new construction. “The housing shortage is the root cause of our affordability crisis,” Zillow chief economist Skylar Olsen told CBS MoneyWatch.

“The simple fact is there are not enough homes where and how they are needed in this country. That drives housing costs to outpace the typical household’s ability to pay,” she added.

In addition to fewer homes, there is more demand, as more people are reaching the ideal age to buy their first home. During the pandemic, due to the rise of people remote working and their need for a home office, the demand for houses also increased.