With President-elect Donald Trump’s administration poised to implement stringent immigration policies, including plans to “seal the border” and deport millions of undocumented migrants starting in 2025, the housing market could face significant challenges. Immigrants play a crucial role in the construction labor force, and any reduction in their numbers could lead to increased housing costs and supply constraints.
Immigrant Labor in Construction
Approximately 30% of the construction workforce in the United States consists of immigrants. A reduction in this labor pool due to stricter immigration policies could lead to higher construction costs and a slowdown in housing development. The recent surge in immigration during President Joe Biden’s tenure has contributed to the labor market’s resilience, even amid aggressive interest rate hikes by the Federal Reserve. However, if border crossings continue to decline under Trump’s administration, the construction industry may experience a tighter labor market, potentially stunting economic growth.
Goldman Sachs projects that net immigration could decrease to about 750,000 annually, following the Republican majority in Congress. This figure represents a significant drop from the roughly 1 million average per year recorded from 2017 to 2019 and a stark decline from the peak of around 3 million in 2023.
Impact on Housing Supply and Demand
The deportation of undocumented migrants, who constitute an estimated 14% of the construction workforce, will likely lead to a reduced labor supply in the industry. This reduction could result in less residential construction, capping supply growth and potentially driving up home prices.
While recent immigrants may not significantly contribute to immediate housing demand—often residing in public housing or with family and friends—the long-term effects of decreased immigration could ultimately dampen housing demand. The immigration influx during Biden’s presidency may have temporarily increased housing demand, but the anticipated decline under Trump could offset this growth in the future.
Counterbalancing Policies
In response to potential housing challenges, Trump has pledged to pursue various policies aimed at making housing more affordable. These may include:
- Tax Reductions: Lowering taxes to increase disposable income for potential homebuyers.
- Loosening Lending Standards: Making it easier for individuals to secure loans for home purchases.
- Streamlining Construction Processes: Reducing bureaucratic hurdles for builders to expedite the construction of new homes.
- Utilizing Federal Land: Opening federal land for development to increase the availability of housing.
These measures could mitigate some of the negative impacts stemming from reduced immigration, potentially balancing the housing market dynamics.
Conclusion
The intersection of immigration policy and the housing market is complex, with significant implications for labor supply, construction costs, and housing affordability. As the Trump administration prepares to implement its immigration agenda, stakeholders in the housing sector will need to navigate the potential challenges and explore strategies to sustain growth and affordability in the face of these changes.
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