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The BPC Immigration Task Force recently released a study that quantifies the economic impact of immigration reform. The study showed that immigration reform could jump-start the housing recovery by increasing residential construction spending by an average of $68 billion per year over a 20-year period.

What opportunities and challenges will immigration reform pose for future housing demand, housing markets, and/or economic revitalization?

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By Mark Calabria

America’s cities and housing markets have been repeatedly remade in the face of immigration. While the momentum for legislative immigration reform has slowed in Washington and the weak economy has reduced the attractiveness of the U.S. job market, America is still home to over 16 million foreign-born households, representing 14 percent of households. As these families move towards resembling the housing patterns of native and naturalized citizens, they will dramatically impact the housing market.

While every U.S. state has some foreign-born residents, the distribution of foreign-born households is far from random. Almost one of four resides in California, predominately in the greater Los Angeles area. Not surprisingly, New York, Texas and Florida are also home to significant numbers of foreign-born residents. Over a third of all foreign-born households reside in these four states. Even within those states, foreign-born residents are predominately clustered in select cities. Important magnets outside these four states include Chicago, Washington DC, Boston and Atlanta. 

In a handful of areas, international migration has softened the blow of internal outmigration. New York State, for instance, has witnessed a steady outflow of U.S. residents leaving for other states for years. Only because of the combination of natural increase and international migration has New York seen any population growth. The Midwest, however, has not been as lucky. While Michigan and Illinois have witnessed significant foreign immigration, those numbers have been swamped by domestic emigration. Of course, without any foreign immigration, the Midwest would be even worse off.

The dynamics of foreign immigration remind us that we do not have a national housing market, but rather we have lots of local housing markets. Many have seen their potential decline arrested thanks to foreign immigration, where others have seen an already booming population increased further. With or without comprehensive immigration reform, the convergence of U.S. and global incomes will likely slow immigration over the next few years. U.S. cities that have survived almost entirely on foreign immigration will likely be forced to adjust and re-think their economic development strategies.  

Mark A. Calabria, Ph.D. is director of financial regulation studies at the Cato Institute.

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