No matter where you stand in the debate, make no mistake about the importance of immigration to the home building industry. Without it, two out of every five households formed in the past 10 years would be nonexistent. Translation: 4.6 million fewer housing starts since 1995. The true loss would likely have been even greater. After all, many immigrants in this country illegally don't answer the door when Uncle Sam comes knocking.
SEEING DOUBLE Unlike Japan and Europe, the United States benefits from the fact that we are, and always have been, a nation of immigrants. Today, immigrants make up more than 10 percent of the U.S. population.
Other industrialized nations face the prospects of declining populations as their baby boomers age and are not replaced one-for-one by younger generations. Here, immigration offsets the aging society. So we enjoy the continuation of strong demand for new homes. Immigration fuels economic growth by providing the nation with low-cost labor that is willing to work jobs many native-born Americans shun.
Homeownership is no less a part of the American dream for immigrants than it is for people born in this country. Although the foreign-born accounted for about 12.6 percent of all U.S. households in 2004, they represented fewer than one in 10 homeowners. But, from 2000 to 2004 in the fastest growing states of California, Florida, Texas, Arizona, and Nevada, they bought new homes in direct proportion to their percentage of household formation–12.4 percent. What's more important is that although these younger immigrants are heavily concentrated in some of the least affordable metropolitan areas in the nation—California, South Florida, and New York—from 1999 to 2003, they accounted for 16 percent of first-time buyers nationally. In the West, during this same period, one of out of every four first-time home buyers was from foreign shores.
States where the immigrant presence is greatest also happen to be the states that command the largest shares of the national home building market: Texas, California, and Florida. The immigrant share of all homeowners in these states is over 14 percent, including 25 percent in California. Immigrants bought more than 17 percent of the new homes built in these states since 2000.
LABOR FORCE Moreover, home builders and remodeling contractors are relying on foreign-born labor. The math is blurry because no accurate counts exist. As a proxy, immigrants nationwide accounted for 19 percent of all workers in the construction and extraction occupations and 26 percent of just construction laborers in 2000; however, the numbers are probably higher.
In 21 states, one out of every five construction laborers are immigrants, and in nine states, they're the same 20 percent of people employed in all construction and extraction occupations. In California, Texas, Nevada, Arizona, Colorado, Georgia, Florida, and Illinois, the range is from 30 percent to 50 percent of all workers. The immigrant construction labor force is overwhelmingly Hispanic in most states, except in New York, New Jersey, Illinois, Connecticut, and Massachusetts.
If immigration flows are disrupted, labor shortages in construction will develop quickly. Wages would likely go up, forcing housing costs to rise. Even then, shortages might persist because the native born prefer jobs that are less seasonal, less physically demanding, and less risky.
Again, any significant throttling back in immigration would have dire consequences on demand. As a scenario, change immigration assumptions for the next 10 years from 1.2 million new immigrants per year to 850,000. There goes 1.3 million households from expected growth—a 10 percent reduction in underlying household demand for new homes. The national mood on immigration increasingly will shape the industry's future.
Eric Belsky is the executive director of the Joint Center for Housing Studies at Harvard University.