How Trump’s plan for mass evictions could affect home prices

President-elect Donald Trump has said his plan to deport millions of undocumented immigrants will solve the country’s housing crisis.

Housing industry experts say the reality is more complicated.

On the campaign trail, Trump repeatedly pointed to illegal immigration as the cause of high housing costs, vowing that his plan to carry out the “biggest deportation operation in American history” would lower home prices.

Immigration is “driving housing costs through the roof,” Trump said at a September rally in the swing state of Arizona.

After his election victory last week, Trump announced his plan to appoint Tom Homan as his “border czar” in charge of deportations.

Homan, the former acting director of Immigration and Customs Enforcement during Trump’s first term, has made clear his hard line in favor of widespread deportations of people living in the US illegally.

Trump also signaled his seriousness about carrying out an immigration crackdown with his selection of Stephen Miller as deputy chief of staff for policy.

Miller served as a senior adviser and speechwriter during Trump’s first stint in the White House and is an outspoken immigration hard-liner.

Layoffs could affect the construction workforce

The Department of Homeland Security estimates there are about 11 million unauthorized immigrants living in the US, although Trump and his supporters argue the number is much higher, perhaps twice the official figure.

Trump has argued that deporting many or all of those people will lower housing costs for Americans, reducing competition for homes.

But economists and housing industry experts warn that widespread evictions could make new homes more expensive, driving up labor costs.

“Mass deportation would seriously harm the housing construction workforce. Not only do builders have to replace workers, which takes time and money to do, but they will likely have to pay more for replacement labor in the future, says Realtor.com senior economist Joel Berner.

“This, combined with the dangerous threat of tariffs on building materials, would significantly increase construction costs and make new homes more expensive. Builders have done a good job of offering less expensive homes recently, but this positive development would be jeopardized,” says Berner.

Construction is the industry that employs the most undocumented workers, with 1.5 million, according to estimates from the New York Center for Migration Studies, a pro-immigrant think tank.

If correct, that means undocumented immigrants make up about 15% of the national construction workforce.

In some states, this percentage is much higher, for example, with half of the construction workers in Texas being undocumented.

Construction is an attractive sector for people without legal work status, largely because it relies on extensive networks of subcontractors, who often pay workers in cash as independent contractors.

Most real estate economists agree that the severe housing shortage is the root cause of the nation’s housing affordability crisis.

Homebuilding activity plunged after the Great Recession and has never recovered to the peak levels seen before that crisis began in 2007.

Now, various estimates put the total shortage of housing units in the country at 1.5 million to more than 7 million.

“Anything that causes a shock to the workforce could have significant implications for the homebuilding industry and our labor supply, and add to housing affordability challenges,” said Jim Tobin, CEO of the National Association of Home Builders. .

“We are already facing a labor shortage crisis, and the lack of skilled labor increases labor costs, slows the pace of construction and ultimately results in higher house prices.”

A Trump spokesman did not respond to a request for comment on his immigration plans and their impact on the housing market.

Few undocumented immigrants are homebuyers

Evidence that immigration is a major factor in housing costs is mixed.

While there is reason to believe that higher levels of immigration can drive up local rents in a city, the recent post-pandemic surge in home prices began before levels of illegal immigration increased.

Undocumented immigrants living in the US are not eligible for conventional mortgages.

However, they can buy houses with cash or use some kind of obscure and unconventional mortgage.

According to estimates of the Urban Institute, between 5,000 and 6,000 mortgages of this type were issued last year.

After all, that would account for about 0.1% of all new mortgages issued for the year.

“The number of homes being purchased by undocumented individuals is off the radar,” says Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals.

Conversely, Acosta points out that foreign buyers living abroad bought about 54,000 homes worth $42 billion last year, according to data from the National Association of Realtors.

“That has a bigger impact on price points,” he says.

“Subtracting the small number of undocumented people who live here and work here, who may be in the home buying market, won’t even be a fraction of that number.”

On the other hand, there is some evidence that undocumented immigrants, who are more likely to be renters than homebuyers, can affect local rents.

Academic studies have found that a 1% increase in a city’s population corresponds to an increase in rent of about 1%.

“Mass evictions would probably have more of a negative impact on demand in the already soft rental market, which could end up enticing potential first-time homebuyers to stay in their rentals and enjoy their costs lower,” says economist Berner.

Over time, if renting becomes more attractive, it could ease demand in the home buying market, ultimately resulting in less pressure on house prices.

However, Berner says this effect would take time to play out and would not be an immediate impact of widespread evictions.