Immigration, Housing Markets, and Community Vitality

Nearly every American community, past and present, has sought to preserve or expand its population. The histories of most cities and towns are replete with stories of real estate developers who went to great lengths to portray the inevitability of their communities' growth and success, in the hope of generating a self-fulfilling prophecy. American communities, as a rule, see population growth as an economic engine. New families require homes, automobiles, groceries, furnishings, entertainment, and everything else that makes modern life possible. When communities lose population, the consequences can be dire. Vacant and abandoned houses are an eyesore at best and magnets for dysfunctional behaviors at worst. Shrinking tax bases leave cities with a dwindling ability to maintain infrastructure, make good on pension obligations, and pay the bills incurred in headier times. And as local economies shrink, the job prospects for those left behind dwindle. These facts are worth bearing in mind when contemplating the path forward for American immigration policy. Some 40 million foreign-born persons now reside in the United States, with around a million obtaining legal permission to enter every year. Between a quarter and a third of these immigrants do not have legal permission to live and work in this country. The debate over their fate, which focuses largely on the argument of whether immigrants "take jobs" from Americans, is incongruous with the desire of every community to maintain or expand its population base. Should American communities worry every time a newcomer, foreign or domestic, buys a home and moves in? The obvious answer--no--arises not only by common sense but also from a rigorous analysis of U.S. Census data between 1970 and 2010. Over that 40-year span, the nation's immigrant population quadrupled, to the point where one in every eight American residents was born abroad. (1) As these immigrants did not spread themselves evenly across the country, it is possible to infer their impact on American communities by comparing trends across areas that received varying numbers. This analytical approach has been employed by numerous prior studies of immigrants' impact on labor and housing markets (see, e.g., Altonji and Card 1991, Ottaviano and Peri 2012, and Saiz 2007). Economic Perspectives on the Impact of Immigration Basic economic theory argues that the entry of new families into a community will boost the housing market in one of two ways. First, new homes built to accommodate new families provide a temporary boost to the local labor market, in construction and related sectors. Second, if the housing market is unable to expand sufficiently, because of zoning laws or other restrictions, home values will increase to the point where the new family finds an existing one willing to depart--or at least to accept smaller quarters. Either way, local governments gain from the expansion of the property tax base. When property values rise, homeowners enjoy an increase in equity. The theoretical impact of population expansion on local labor markets is more complicated. The fear that new migrants to a region will "take" jobs from natives might make sense in a world where the amount of work to be done is finite--as if a community's only source of gainful employment were to manufacture a good for export. In reality, most jobs in any community are directly tied to the local population. Ours is a service-dominated economy, and most services are provided by community members to their neighbors. The Challenge to Discerning Impact in Data Empirically assessing the impact of immigration on housing and labor markets would be straightforward if immigrants sorted into communities randomly. The impact of migration could be assessed much the way a new pharmaceutical might be evaluated: by comparing communities that randomly received large numbers of migrants with those that received few. …