Monday, January 5, 2015

11+ Million Undocumented Immigrants in the U.S. Could Be Important for the Housing Recovery

by George Masnick
Senior Research Fellow
President Obama’s recent announcement that he will take executive action on immigration could be an important step in further supporting the sluggish housing recovery. Immigrants have historically been an important part of housing markets, especially for the past two decades. The foreign born have accounted for about one third of net new household formations since 1994 (Figure 1). Immigrants owned 11.2 percent of all owner occupied units in 2014, up from 6.8 percent in 1994, accounting for 27.5 percent of owner household growth over this period.

Source: Joint Center Tabulations of 1994 and 2014 Current Population Survey Data

For households under age 45, the foreign born have accounted for virtually all household growth over this period, as the aging of Generation X led to a decline in native born households in this age range. Meanwhile, as immigrants accounted for a similar level of household growth among heads over age 45, the overwhelming majority (80.3 percent) of total growth in this age range over the past 20 years is attributable to native-born adults. The particularly high numerical household growth among 45-64 year olds represents the aging of the baby boom generation into this age span during this 20 year period. 

Households headed by those under the age of 45, however, have had a very different mix of growth by nativity of the head. Figure 2 breaks household growth for under-45 year olds into 5-year age groups, and separates the native-born growth into natives with one or both parents being foreign born (second generation immigrants) and natives where both parents were native born. I have separated out the native-born children of immigrants to make the point that immigrant population growth has both an immediate impact on housing markets and a secondary impact (approximately 20-40 years later) through the children they bear in the U.S. As shown, second generation immigrants have accounted for the largest share of growth in under-30 year old households, followed by immigrants themselves. Looking forward, we expect that second generation growth originating from the higher immigration levels of the 1990s and early 2000s will be even larger.

Source: Joint Center Tabulations of 1994 and 2014 Current Population Survey Data

Over the next two decades, native-born cohorts that are third or higher generation immigrants will begin to exercise a more positive influence on household growth as millennials born after 1985 continue to age into young adulthood. And as the smaller Generation X enters middle age, immigrants and their native-born children will continue to bolster households in this age range, just as they did over the past two decades for the under-45 age group.

There is considerable potential for additional household formation and homeownership among the foreign born, particularly for the nation’s estimated 11 million undocumented immigrants, many of whom have been cautious about signing a lease or applying for a mortgage given their status. A recent Pew Research Center report estimates that 61 percent of undocumented immigrants have been here for 10 or more years, and the longer the duration of residence in the U.S., the more likely that immigrants will form independent households and pursue homeownership.  

Because the data in the above charts are national in scope, and because undocumented immigrants are more concentrated in some parts of the country than in others, their impact at a local level can be much more pronounced. While there are obviously a number of factors to weigh in deciding whether and how to offer a path to citizenship for undocumented immigrants, a greater appreciation of the role that immigrants play in our housing markets—and  through housing in the health of the overall national economy—should be a part of the discussion of immigration reform. Granting undocumented immigrants who have been working here for an extended period of time, especially those with children born in the U.S., the opportunity to remain in this country under the law will certainly be an important boost to the housing sector of the economy. 

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