Q&A of the Day – How Will Deportations Impact Housing Inflation?
Each day I feature a listener question sent by one of these methods.
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Today’s Entry: @brianmuddradio What people are missing is that deportations will reduce housing inflation.
Bottom Line: You’re right. Amid the many concerns being voiced in news reports about President Trump’s recently announced tariffs on imports from Canada, China and Mexico potentially leading to higher costs for many goods... What isn’t being discussed is the deflationary impact of Trump’s border enforcement policies and deportation plan. The fact of the matter is that the record level of illegal immigration into the United States during the Biden administration proved to be highly inflationary.
Last April I reported on the inflation impacts of illegal immigration for the purpose of determining whether it was inflationary, or deflationary as open borders advocacy groups had argued that it was deflationary (the argument being that illegal immigrants provided cheap labor doing jobs that Americans would demand much higher wages to do). During that exercise I was able to make these three conclusions:
- There is no doubt that the net effect of those lacking legal status is inflationary
- The narrative that illegal immigration is deflationary is false
- Housing is the sector of the economy with the most inflationary pressure from illegal immigrants
In fact, during that analysis I surmised that the likely reason the Biden administration and the Federal Reserve so poorly miscalculated and mismanaged inflation was due to this reality. As I noted... (Illegal Immigration is) likely that the reason economists and Federal Reserve governors alike consistently underestimated inflation pressures. Economic modeling and forecasting is based on knowns which rely heavily on historical trends. Those aren’t nearly as reliable when historic numbers of people lacking legal status pour into the country, often becoming part of an ever-growing shadow economy.
While inflation pressures came at us from all sides over the prior four years – the biggest impact came from our biggest expense – housing. A 2024 Center for Immigration Studies report showed that the settled (housed) illegal immigrant population grew by 10.2 million people. That number was likely higher by the end of the administration. Obviously, those people live somewhere and the extra demand for housing has had significant impact on housing inflation. There are multiple examples and data points we can point to, to illustrate the point. I’ll start with an example that’s well known and is also highly illustrative of the impact illegal immigration can have on housing costs in communities.
The story of Springfield, Ohio, is a well-established one. The Biden administration brought approximately 20,000 asylum seekers (almost all of which are illegal immigrants) into the community of about 60,000 people. According to the CATO Institute, using Redfin sales data, the average increase in housing costs in Springfield rose by 101% during this time compared to a 46% increase nationally. This is a good example as Springfield doesn’t otherwise benefit from outside demand factors. In other words, housing inflation has been a staggering 55% higher than it likely otherwise would have been in Springfield, Ohio due to illegal immigration! Now of course that’s a specific and extreme example so what has the typical impact been?
Last September in a House Hearing, a CIS presentation entitled: The Consequences of Illegal Immigration for Housing Affordability, Government Budgets, and American Workers surmised these takeaways:
- The current surge of illegal immigration is unprecedented
- Visa overstays also hit a record
- The illegal immigrant population grew to 14 million by 2024
- By increasing demand for housing, immigration drives-up costs in areas where immigrants settle
And what has that translated into regarding the cost of housing?
- For every 5% increase in immigrant population the increase in housing costs for American citizens was 12%
Now that might sound odd, but here’s where there’s a multiplication effect. Illegal immigrants having commonly been using affordable housing options. The lack of housing specifically targeted for affordable housing pushes more people into traditional housing units with higher costs. What’s more are the hidden costs – IE higher property taxes to pay for schools due to large illegal immigrant populations. The same study showed the cost of public education to taxpayers for illegal immigrants topped $68 billion last year.
How does that translate in Florida for example? Illegal Immigration has added an estimated $46,427 to the cost of the average home or $288 per month in rent. Given these realities there’s no doubt that the combination of curbing illegal immigration into this country while also targeting over 1,000 illegal immigrants per day will have a profound impact on reducing housing inflation over the next four years.