States Take Charge

The failure of Congress to pass meaningful immigration reform is starting to hurt some home builders, especially in states with strict new laws such as Arizona and Oklahoma.

Builders in those states report that “get tough” laws passed by the state legislatures caused widespread panic. In some cases the immigrants fled to other states or back to Mexico. As the labor supply dwindled, builders were forced to delay projects and increase prices, often by as much as 10 percent.

“My old painter used to have 15 guys; now he's down to seven people,” says Glenn Shaw, president of Shaw Homes and president of the HBA of Greater Tulsa.

The Tulsa, Okla., region has been the epicenter of immigration problems for home builders and subcontractors. Oklahoma's law, which went into effect Nov. 1, makes it illegal to transport undocumented workers, and also requires employers to verify the legal status of workers.

Credit: SOURCE: OKLAHOMA HBA

Dramatic Impact

Public benefits previously available to undocumented immigrants, such as in-state tuition at state colleges, are harder to obtain. In-state tuition is now available only to children of undocumented immigrants who have lived in the U.S. for more than two years, graduated from an Oklahoma high school, and document having applied for citizenship.

Fearing reprisals from local officials, roughly 25,000 to 30,000 Hispanics left the Tulsa region in the past several months, and the mass exodus has had an effect. A survey conducted by the Greater Tulsa HBA found that 80 percent of builders and subcontractors surveyed have lost workers, and that the average loss is about 20 percent of the work crews. According to the survey, 55 percent are experiencing delays of weeks due to the loss of the labor force, while another 43 percent are experiencing delays of days; 81 percent say they will lose more workers in the future because of the current law.

A statewide survey conducted by the Oklahoma HBA shows that 76 percent of home builders believe they will lose workers if Oklahoma's immigration law stays in effect. As of mid-December, a lawsuit contesting the Oklahoma immigration law by the National Coalition of Latino Clergy & Christian Leaders was pending.

Not every state has experienced as much tension as Oklahoma. Business is so bad in states such as Colorado and Georgia that home builders there don't report much negative news regarding immigration legislation. But it may affect everyone eventually, as immigration remains a front burner issue in state legislatures across the country.

The National Conference of State Legislatures (NCSL) reports that as of mid-November, 1,562 pieces of legislation related to immigration had been introduced among the 50 states in 2007. Of those bills, 244 became law in 46 states.

Also according to NCSL, the laws cover every policy area, including employment, health care, identification, driver's and other licenses, law enforcement, public benefits, and human trafficking.

As the immigration issue has progressed, the NAHB has been on record supporting a guest worker program and has expressed concern about all the statewide initiatives.

“Many of the more than 1,500 immigration bills won't move forward, but others will become law, creating problems for builders by making an already confusing situation even more complicated,” says Jerry Howard, the NAHB's executive vice president and CEO.

“That's why it's important that Congress enact comprehensive immigration reform that protects our borders and provides a process by which immigrants can legally enter the country to work,” explains Howard.

Lobbying for immigration reform on a federal level is all well and good, but a national solution failed, replaced by the state efforts, many of which will make life tougher for builders and subcontractors.

In Arizona, the law makes it a violation to “knowingly” employ an unauthorized alien. Builders face a 10-day license suspension for the first offense and can have their licenses permanently revoked on a second offense. Under the law, builders face losing their building license as well as their driver's license and all permits.

Other aspects of the legislation that builders find onerous: The law requires companies to enroll in E-Verify, a Web-based system that checks an employee's legal status, but was designed as a pilot system. It's unclear if the system can handle the 150,000 Arizona businesses that are required to enroll. The law also authorizes law enforcement to investigate any immigration complaint—even if it's not done in writing.

David Selden, a Phoenix lawyer who is representing the U.S. Chamber of Commerce and about a dozen other business groups in a lawsuit that contests the Arizona immigration law, says the law that passed last year is flat-out unconstitutional.

“The state can deny a license to someone who violated federal law,” he says. “But they can't pass a new state law with its own set of procedures,” says Selden, adding that the Arizona law is preempted by federal immigration law.

But in those other states such as Colorado and Georgia, which also have passed fairly tough immigration laws, HBA officials say the legislation has yet to have much impact.

“The housing market is so bad here that I don't think we'll know the full impact until business conditions turn around a bit,” says Rob Nanfelt, government affairs director for the Colorado HBA.

The HBA is telling builders to deduct withholding for all employees since, starting on Jan. 1, builders could be held liable for taxes for employees who do not have a valid taxpayer ID.

Ed Phillips, executive vice president of the Georgia HBA, says the same is largely true in his state.

The Georgia HBA's advice to its members: Be very careful, especially in hiring people who work for you directly. As of July 1, 2007, builders may be liable for state income tax not withheld from illegals. And, as of Jan. 1 of this year, builders cannot deduct the wages of unauthorized employees as a business expense for state income tax purposes.

For now, much of the breaking news is in Arizona and Oklahoma. But that's because state legislators nationwide are anxiously awaiting the results of lawsuits in those states.

If a federal judge rules that the Arizona law is constitutional, it will become very difficult for business groups to amend some of these tougher measures. And many of the tough laws against undocumented immigrants are politically popular, so builders may simply have to figure out how to deal with them.

States Have Busy Year