Illegal Immigrants Worsening US Housing Crisis

Illegal immigrants sit by concertina wire fence while waiting to be transported by U.S. law enforcement officers after crossing the Rio Grande from Mexico into Eagle Pass, Texas, on July 24, 2023. Go Nakamura/Reuters

The surge in illegal immigration into the United States is worsening the country’s housing crisis, putting upward pressure on property prices, and contributing to the homelessness problem.

An influx of illegal aliens tends to add to the demand for homes and push up prices, and many cities don’t have enough affordable homes or shelters to house the rapidly swelling number of people. As property prices rise because of surging demand, some residents can get priced out of the market, becoming homeless.

In Chicago, there were 6,139 homeless residents (pdf) as of Jan. 26, according to a Chicago Department of Family and Support Services count. The city had almost 9,500 illegal immigrants as of Sept. 15, according to data from the Committee on Immigrant and Refugee Rights.

“Chicago’s severely underfunded homelessness system has led to fighting for scarce resources,” the Chicago Coalition for the Homeless said in a statement to Axios.

In New York, which is facing a serious illegal immigrant issue, the government is obliged to provide shelter to any individual who makes such a request. At the beginning of September, the city was sheltering almost 60,000 asylum seekers, according to data from the city’s Comptroller’s office.

Earlier this year, Sen. J.D. Vance (R-Ohio) raised the issue of illegal immigrants straining the housing supply.

“If you think about what it means to have 20 [million] or 25 million undocumented, illegal immigrants in a country, in a situation where we’re not building enough housing ... that puts incredible pressure—you have way more buyers for way fewer homes,” he said during a Senate Banking Committee hearing in February.

“And that puts incredible pressure on homebuyers and people who just want to live a good life.”

In the past fiscal year alone, more than 2.7 million illegal immigrants have entered the United States, according to nationwide encounter data from U.S. Customs and Border Protection.

Since illegal immigrants tend to have lower education and professional skills, they end up in a lower economic class, and their demand for housing boosts the low-cost rental market.

A 2017 study, published by ScienceDirect, that looked into the economic impact of immigration on housing found that a 1 percent increase in immigration inflow into a metropolitan statistical area resulted in a roughly 0.8 percent increase in rent and a boost in home prices. The rents and home prices of neighboring regions were also found to increase.

Soaring housing costs and a shortage of affordable housing have worsened homelessness in recent years.

According to data from the National Alliance to End Homelessness, there were 421,392 homeless individuals in the United States in 2022 and 127,768 “chronically homeless individuals.” Chronically homeless refers to individuals with disabilities who have experienced long-term or repeated incidents of homelessness.

An Aug. 14 analysis by The Wall Street Journal estimated that homelessness has risen by 11 percent in 2023 from its 2022 level.

Mortgage Demand and Affordability

The illegal immigrant crisis is happening as high mortgage rates are dampening housing demand. According to data from Freddie Mac, the average weekly interest rate on a 30-year fixed-rate mortgage was 7.18 percent for the week that ended on Sept. 20, compared with 6.29 percent in 2022 and 2.88 percent in 2021.

“Mortgage rates are sitting near a two-decade high, and U.S. home prices rose 3 percent year over year during the four weeks ending Sept. 17, pushing monthly housing payments to an all-time high,” a Sept. 22 statement from real estate brokerage firm Redfin reads.

A sign is posted in front of a home for sale in San Francisco on May 11, 2023. Justin Sullivan/Getty Images

“Soaring costs have pushed pending home sales down 13 percent from a year ago. The total number of homes for sale is down 16 percent, as many homeowners stay put to keep relatively low mortgage rates.”

Even though the Federal Reserve decided against an interest rate hike at its recent meeting, the central bank indicated that interest rates may remain elevated longer than anticipated—well into 2024. This could keep mortgage rates higher, thus worsening the housing crisis.

Lawrence Yun, chief economist at the National Association of Realtors (NAR), in a Sept. 21 statement, pointed to the issue of tight supply situation in the housing market.

“Home prices continue to march higher despite lower home sales. ... Supply needs to essentially double to moderate home price gains,” Mr. Yun said.

According to surveys conducted by the NAR, the top reason—at 34 percent—why buyers say they haven’t yet bought a home is because of an insufficient number of homes being available for purchase within their budgets. The NAR data show that 18 percent said they were waiting for mortgage rates to drop, and 9 percent said they were waiting for home prices to decline.

“Home buyers face the most difficult affordability conditions in nearly 40 years because of limited inventory and rising mortgage interest rates,” said Jessica Lautz, NAR’s deputy chief economist and vice president of research.

“The impact is exacerbated among first-time buyers, who are more likely to be from underrepresented segments of the population.”

In July, individuals had to show an annual income of $104,496 to qualify for a median-priced existing single-family home valued at $412,300, according to NAR data (pdf). This is more than double the $49,680 in qualifying income required in 2020, when the median-priced home cost $300,200.

Mortgage payments as a percentage of income rose to 28.5 percent from 14.7 percent during this period, with monthly payments jumping to $2,177 from $1,035.