A New Fed Study Puts Immigration At The Center Of The Housing Affordability Debate
America’s housing crisis has long been blamed on high mortgage rates, tight inventory, zoning restrictions, construction delays, investor activity, and years of underbuilding. Now, a new Federal Reserve working paper adds another force to the affordability debate: the sharp rise in unauthorized immigration during the Biden years.
The paper, published as Dallas Fed Working Paper 2607, examines the period from early 2021 to early 2024, when the United States experienced what the authors call an “unprecedented boom” in unauthorized immigration, followed by a rapid slowdown beginning in mid-2024. Using newly available administrative microdata, the authors found that unauthorized immigrant worker flows raised local employment, but also pushed up local home prices and rents without producing enough new housing supply to absorb the added demand.
That finding matters because the national housing market was already stretched thin. Harvard’s Joint Center for Housing Studies reported that high home prices and elevated interest rates pushed home sales to their lowest level in 30 years, while high rents left a record number of renters cost-burdened.
What the Fed Working Paper Actually Found
The headline number is straightforward: the researchers found that an increase in unauthorized immigrant worker flows equal to 1% of a local area’s initial employment raised local house prices by about 2.2% and market rents by about 1.4% during the boom period. The rent effect was slightly smaller for single-family units, at roughly 1.2%, and slightly larger for multifamily units, at about 1.5%.
The paper’s broader calculation is even more politically explosive. For the average metropolitan area, the authors estimate that unauthorized immigrant worker flows can explain approximately 30% of total house-price growth and 20% of total rent growth during the 2021–2024 boom period.
We should read that carefully. The paper does not say immigration caused the entire housing crisis. It says the surge in unauthorized immigration was a measurable contributor to price growth in local housing markets, especially where housing supply could not respond quickly enough.
Why Rents Rose Faster When Housing Supply Stayed Tight
The housing market reacts brutally when demand rises faster than supply. Every additional household needs somewhere to live. When available units are limited, more people compete for the same apartments, rooms, houses, and starter homes. That competition pushes rents higher first, then filters into home prices as investors, landlords, families, and first-time buyers all chase scarce inventory.
The Fed paper describes this as a housing demand shock in a market where short-run supply was relatively fixed. In plain terms, people arrived and joined local labor markets, but cities did not build enough homes quickly enough to keep rents and prices stable.
Freddie Mac has separately estimated that the U.S. housing market remained short by about 3.7 million units as of the third quarter of 2024. Freddie Mac also noted that housing supply had not grown enough to meet demand, forcing renters and buyers to bid up prices on available housing.
The Biden-Era Immigration Boom in Numbers
The Congressional Budget Office reported that immigration into the United States increased sharply in recent years, with much of the increase coming from people it classifies as “other foreign nationals.” CBO estimated that net immigration in that category would exceed pre-2020 expectations by 8.7 million people over the 2021–2026 period.
CBO said the category includes people who are not U.S. nationals, lawful permanent residents, or INA nonimmigrants. Some were permitted to enter or remain in the country, while others were not. CBO estimated that about 65% of the 8.7 million people in the surge population were unlawfully present when they arrived, while about 35% were qualified aliens upon arrival.
The Dallas Fed paper uses a different research design and focuses specifically on unauthorized immigrant worker flows, but both bodies of research point to the same central reality: population growth accelerated quickly, and local housing markets had to absorb that pressure.
The Labor Market Effect Was Different From the Housing Effect
The Fed working paper did not find a simple “immigration hurts all workers” story. The authors found that unauthorized immigrant worker flows increased local employment approximately one-for-one, without significant declines in local wages.
That is a key distinction. In the labor market, the new arrivals expanded the workforce. In the housing market, they expanded demand for shelter. The first effect can support employment growth. The second can strain renters and homebuyers when housing construction lags.
That split explains why the issue is politically difficult. A local economy can gain workers and still become less affordable for residents. Restaurants, warehouses, construction firms, hotels, farms, and service businesses may benefit from a larger labor pool, while renters face tighter competition for apartments.
Why the Housing Supply Response Was Too Weak
The Fed paper found little evidence that new housing construction expanded enough to offset the new demand. The authors examined housing permits and found small, statistically insignificant effects on new housing supply in their preferred instrumental-variable estimates.
That matters because immigration-driven demand does not automatically create immediate housing supply. A city cannot approve, finance, build, inspect, and lease thousands of new units overnight. Even when builders want to respond, they face zoning rules, labor shortages, land constraints, financing costs, insurance costs, local opposition, and years of regulatory delay.
This is where immigration and housing policy collide. When border policy increases population faster than housing policy allows construction, affordability weakens.
The Study Does Not Erase Other Causes of High Housing Costs
The immigration finding is important, but it sits inside a larger affordability crisis. Harvard’s Joint Center for Housing Studies noted that home prices and rents had already surged during the pandemic era, with major pressure coming from millennial household formation, remote-work demand for more space, historically low mortgage rates in 2020 and 2021, and constrained housing supply after years of underproduction.
That means the strongest reading is not “immigration alone caused high housing costs.” The stronger, more accurate reading is this: unauthorized immigration added a significant demand shock to a housing market that was already short of homes, already expensive, and already slow to build.
That is why the Fed paper is so consequential. It gives numbers to a debate that has often been driven by slogans. It shows that unauthorized immigration can raise rents and home prices in measurable ways, especially when local supply is slow, limited, or politically blocked.
Why Renters Felt the Pressure First
Renters are usually the first to feel demand shocks because rental markets adjust faster than ownership markets. Lease renewals come quickly. Landlords can raise asking rents when vacancy rates tighten. New arrivals often enter the rental housing market before becoming homeowners. In dense metro areas, even small changes in demand can shift prices when vacancies are low.
The Dallas Fed paper found the rent effect was slightly larger for multifamily units than for single-family rentals, which fits the pattern of pressure landing heavily on apartment markets.
For working-class renters, even a 1% to 2% increase is not abstract. On a $2,000 monthly rent, a 1.4% increase is $28 per month, or $336 per year. In a household already squeezed by groceries, insurance, gas, utilities, and childcare, that increase adds to other cost pressures.
The Homebuyer Squeeze Became Even Harder
For homebuyers, a 2.2% price increase can translate into thousands of dollars in added purchase cost. On a $400,000 home, 2.2% equals $8,800. That higher price can also raise the down payment, mortgage balance, closing costs, property taxes, and insurance exposure.
This is why immigration-driven housing demand can affect people who never rent to a recent migrant and never compete directly with one for a lease. Local price pressure spreads through the market. Apartment rents affect investor returns. Investor returns affect bids on homes. Higher demand affects appraisals. Appraisals affect neighborhood values. Neighborhood values affect property taxes.
Housing pressure is not isolated. It compounds.
The Policy Lesson: Border Policy and Housing Policy Cannot Be Separated.
For years, Washington treated immigration policy and housing policy as separate debates. One belonged to border security, asylum processing, labor supply, and federal enforcement. The other belonged to zoning boards, builders, mortgage lenders, mayors, governors, and local planning commissions.
The Fed paper makes that separation harder to defend. If immigration increases the local population and local employment, it also increases local housing demand. If cities cannot build quickly, the result is predictable: higher rents, higher home prices, and deeper affordability stress.
A serious policy response would have to address both sides at once. It would require immigration levels that match administrative capacity and housing capacity. It would also require faster permitting, more starter homes, more apartments near jobs, better infrastructure, and fewer local barriers to construction.
The Political Fight Will Be Fierce
The study gives Republicans a powerful economic argument: the Biden-era border surge not only affects public services and labor markets; it also made housing more expensive in measurable ways. It gives Democrats a harder question to answer: how can the country absorb rapid population growth without making renters and first-time buyers pay the price?
But the paper also challenges simplistic answers. Restricting unauthorized immigration may reduce one source of housing demand, but it will not magically create millions of missing homes. America still has a structural supply shortage, and Freddie Mac’s 3.7 million-unit shortage estimate shows how deep the gap remains.
The winning argument will not be the loudest one. It will be the one that connects the full chain: immigration flows, labor supply, household formation, rental demand, building restrictions, mortgage rates, and local affordability.
A Preliminary Paper, But a Major Signal
The Dallas Fed working paper is a preliminary draft circulated for professional comment, and its findings do not necessarily represent the views of the Federal Reserve Bank of Dallas or the Federal Reserve System.
That caveat matters. But it does not make the findings irrelevant. The authors used administrative microdata, local market variation, and a formal empirical design to study a period that reshaped American politics and household budgets.
The conclusion is sharp: during the Biden-era unauthorized immigration boom, local housing demand outpaced local supply in many markets. The result was higher rents and higher home prices.
