President Donald Trump has promised a major crackdown on undocumented immigrants now living in the country, and he also wants to curtail legal immigration to the U.S., with the goal of returning to what he calls “historic norms.” His plan is controversial on a political level, but it also is likely to have real economic consequences for the nation’s housing market.
The Hispanic home ownership rate increased from 44.1 percent in the first-quarter 2015 to 46.3 percent as of this past fourth quarter, according to U.S. Census Bureau figures. The National Association of Hispanic Real Estate Professionals (NAHREP), a trade association
with more than 20,000 members, is working to boost that figure to 50 percent over the next decade as part of its Hispanic Wealth Project.
After winning the election this past November, then President-elect Trump vowed to deport as many as 3 million people as soon as possible after taking office. During his campaign he promised to deport a total of some 11 million over a two-year time frame as well as reduce the annual flow of immigrants coming into the country.
“If they [the Trump administration] were able to accomplish that, or something close to it, then a blind man could tell you that it will have a substantial impact on the housing market,” says Gary Acosta, co-founder and CEO of NAHREP. “I would venture to say it could be something akin to the housing crisis that we experienced from 2008 to 2012. It could be that catastrophic.”
The nonpartisan Migration Policy Institute (MPI) reports that of the estimated 11 million undocumented immigrants in the country today, about 71 percent were born in Mexico and other Central America countries. MPI also estimates that about 4 million unauthorized immigrants in the U.S. have children residing with them who are under the age of 18 — for a total of 5.1 million children, or 7 percent of the U.S. child population. About 81 percent of those children are U.S. citizens or otherwise legally present in the U.S. That is an indication of the tremendous disruption a mass-deportation program would have on the nation’s youth — and future home buyers.
“The president and his people are going to find there’s a huge downside to massive expulsion of immigrants and families who are here and who are contributing already to the economy,” says John Taylor, president and CEO of the National Community Reinvestment Coalition. “If they do begin to deport large numbers of people, they will and many are gainfully employed and may own [or support family members who own] houses, so now we’re going to be throwing a bunch of houses back on the market.”
Risk of foreclosure
Research has shown that deportations in large numbers can prompt foreclosure spikes, another potential negative ripple effect of an aggressive immigration-enforcement policy on the housing market. That pattern was demonstrated among Hispanic homeowners in U.S.counties where large-scale deportation sweeps were carried out in recent years.
According to a study published in the journal Sociological Science and reported in The New York Times, the bulk of the 3 million undocumented immigrants deported between 2005 and 2013 were working males. Once their incomes were subtracted from the household income stream, one of the study’s authors explains, the remaining family members — many legal residents or U.S. citizens — often struggled to make mortgage payments.
The impact of Hispanic homebuyers on the overall market has been increasing steadily and is expected to continue on that trajectory. The Urban Institute projects that between 2010 and 2030, the bulk of new homeowners will be nonwhite, with more than half expected to be Hispanic — while less than 7 percent will be white. “Within 15 years, the highest number of home purchases, which drives the building and mortgage markets, are going to be made by people of color,” Taylor says. “That’s what’s happening. It’s a changing America.”
NAHREP estimates that about 3 million of the 11 million undocumented immigrants in the U.S.currently are potential homeowners — assuming a path to citizenship can be established. A study by the Americas Society/Council of the Americas found that, based on an analysis of U.S. Census Bureau data, the estimated 40 million immigrants in the country collectively have “created $3.7 trillion in housing wealth, helping stabilize less desirable communities where home prices are declining or would otherwise have declined.”
William E. Brown, president of the National Association of Realtors (NAR), says ensuring that the nation’s borders are secure should be a high priority. He also stresses, however, that any immigration policy should take into account the role foreign buyers and immigrants play in the nation’s housing market.
“According to the recent NAR data, foreign buyers, recent immigrants and temporary visa holders purchased residential property valued at over $100 billion over the one-year period we studied,” Williams said in a prepared statement provided to Scotsman Guide. “The reality today is that we live in an international marketplace, and the importance of a free flow of capital across the borders is clear.
“To that end, we support a policy that … settles the status of illegal immigrants in a way that acknowledges the reality of their presence, their role in the economy and their contributions to our society.”
NAHREP’s Acosta says he still holds out a glimmer of hope that Trump’s tough talk on immigration could ultimately lead to a productive policy compromise.
“Trump is a guy who has been in the [real estate] and construction business, and he has to have some fundamental understanding of how destructive a [mass-deportation] policy like this will be,” Acosta says. “So if he pushes us collectively toward a more permanent solution to where people can immigrate into the country legally in much more efficient manner, and we solve for undocumented individuals here already in a more pragmatic way, that could be a positive. We’ll see.”