What kind of impact will immigration reform have on the California housing market?
- Positive (49%, 73 Votes)
- Negative (33%, 49 Votes)
- No effect (19%, 28 Votes)
Total Voters: 149
What will give a positive jolt to the current housing market? Immigration reform.
There are currently 11.1 million undocumented immigrants living within U.S. borders without a viable path to legal status. In many states, without legalization, undocumented immigrants do not have the option of taking out a mortgage to purchase a home. They are therefore forced to rent.
The National Association of Hispanic Real Estate Professionals (NAHREP) in San Diego has argued the passage of immigration reform could add three million new homebuyers into the national market (most of whom would be Hispanic in California). Those three million would generate $500 billion in new mortgages.
Here’s how the NAHREP got those numbers: it is estimated that more than half of the nation’s undocumented immigrant population, six million people, would seek legalization given the opportunity. The NAHREP approximates three million (28% of undocumented immigrants) will pursue homeownership based on the homeownership rates of current naturalized Latinos (nearly 60% of undocumented immigrants are Mexican).
The NAHREP contends the impact of immigration reform on the housing market would be concentrated more heavily in states with large Hispanic populations. In fact, 60% of the nation’s Hispanic population is focused in a small group of states, though the Hispanic population is also growing in states that do not typically have large Hispanic populations.
first tuesday insight
Things are a bit different in California. In the Golden State, undocumented immigrants are already able to purchase homes.
Undocumented immigrants are able to purchase property and take out mortgages by obtaining an Individual Tax Identification Number (ITIN). Still, only 17% of undocumented immigrants in California own homes, according to a recent study by the University of Southern California. The cause of this low homeownership rate may be fear. Though undocumented immigrants may purchase property using an ITIN, obtaining a mortgage and holding title may be perceived as being too conspicuous, preventing them from committing to ownership.
By the same report, there are about 2,600,000 undocumented immigrants residing in California. That’s nearly a quarter of all undocumented immigrants living in the U.S. (1.1 million are in Los Angeles County alone). [See first tuesday Real Estate Economics: Realty Almanac 2013, Chapter 22.1 Golden state population trends]
Nationally, the rate of homeownership among documented immigrants is 28%, according to a 2011 census report. If NAHREP’s projections are distributed evenly across the nation, then 11% of California’s undocumented immigrants would enter the housing market (17% are already there). With a path to legalization, over 260,000 new individuals would enter the housing market in California.
However, according to the USC study, 36% of documented immigrants own homes in California versus 28% at the national level. Assuming this absorption in the housing market will take place over ten years (an arbitrary figure) if immigration reform is passed, the number of newly documented immigrants entering the housing market could range from 260,000 (28%) to 450,000 (34%).
Because undocumented immigrants can purchase homes, it is difficult to gauge just how many more would enter the housing market were they able to gain legal status. However, all trends point to an influx of new homebuyers: California has a higher immigrant population and a higher homeownership rate among immigrants. The murkiness is not if they will buy, but how many – and by our estimates, it will be a lot.
Without the risk of deportation, and without the stigma of the politics of “illegal” hanging over their heads, undocumented immigrants may purchase property through all the conventional means. Thus, they will make up a strong block of new California homeowners, and just in time.
Moreover, with immigration reform comes more openness – which extends to undocumented immigrants’ employers. With documented and naturalized immigrants, employers will begin paying their taxes on their workers and more money will go into the state’s coffers. Employees do not pay taxes, it is the employers who do so by withholding – an employee’s only contact with the tax collector being for a refund.
With the potential for a large pickup in the housing market looming, immigration reform will be a clear boon to agents, brokers, builders and the real estate field as a whole.
We’ve come a long way in California politics from voting to block them out of public education and public assistance 20 years ago, but not far enough. The longer we stall on this, the further we push away life-long contributors to our state’s economy. [See first tuesday Real Estate Economics: Realty Almanac 2013, Chapter 22.1 Golden state population trends]
RE: Awaiting Immigration Reform from the NY Times