President Donald Trump was recently criticized for leaked emails in which his administration planned to retaliate against political opponents by releasing U.S. Immigration and Customs Enforcement (ICE) detainees in sanctuary cities. This heavy-handed tactic scored points with his supporters and drew the ire of opponents in California, which is home to over 45 sanctuary cities.
But sanctuary cities are more than a political football; they have tangible effects on local industries. California’s economy depends on the roughly 2.6 million undocumented immigrants living there and the real estate industry is no exception.
Fewer immigrants means fewer buyers
First, a reality check. A recent first tuesday poll asked readers about the effects of mass deportations on the real estate industry. A plurality of respondents believe that deporting California’s 2.5 million undocumented immigrants will have absolutely no effect on the state’s housing market. 37% of voters see home sales volume rising in response to a sudden vacuum of a group of potential homebuyers.
Some experts are not as optimistic. A 2016 study between Brigham Young and Cornell Universities finds that increased deportations between 2006 and 2008 led to a higher rate of foreclosures in the years that followed among Latino households when compared to other ethnic groups.
One third of undocumented immigrants live in owner-occupied homes, according to a New York Times interview with the study’s authors. Three-quarters of these households are comprised of individuals with different documentation statuses. When mixed-status households pool together resources, their household inevitably collapses when a financial contributor is deported and the household is unable to timely make mortgage payments. This is partly how California’s foreclosure crisis played out.
The Brigham Young/Cornell study suggests that Trump’s mass deportation policy will likely result in another spike in foreclosures. Their absence will also be felt in the rental market. California needs Latino buyers. If these drastic immigration policies gain traction, agents currently serving communities with any significant Latin American population can expect fewer buyers, falling prices and dwindling fees as well.
Real estate sanctuary
Widescale deportations like those studied by Brigham Young and Cornell are achieved through U.S. Immigration and Nationality Act Section 287(g) agreements. These are arrangements in which local law enforcement officers may be deputized into federal immigration agents to interrogate and further detain suspected undocumented individuals as part of their regular law enforcement activities.
This is where sanctuary cities come in. Though there is no legal definition of sanctuary cities, the term is used to describe a municipal jurisdiction that limits its cooperation with ICE’s effort to enforce immigration law. This includes prohibiting 287(g) agreements. In turn, local law enforcement agencies are better able to build trust with undocumented immigrant populations.
Not-in-my-backyard (NIMBY) advocates worry that sanctuary cities will jeopardize their neighborhoods’ safety, but these fears are statistically unfounded. Sanctuary policies make undocumented individuals more willing to report crimes and cooperate with investigations. In fact, white residents of sanctuary cities are safer from violent crimes than those in non-sanctuary cities, according to a 2017 Center on Juvenile and Criminal Justice report.
The California Values Act (Senate Bill 54), more commonly known as the “sanctuary state” law, went into effect January 1, 2018. The controversial law basically applies the sanctuary city model to the entire state of California, limiting how much local law enforcement can cooperate with ICE in enforcing immigration law.
This law prohibits local law enforcement in California from:
- entering into 187(g) agreements;
- inquiring about an individual’s immigration status;
- extending an individual’s detainment with an ICE detainer request;
- arresting an individual based on a civil immigration warrant;
- providing office space in local jails exclusively for ICE;
- using ICE agents as interpreters;
- participating in immigration enforcement task forces,
- providing ICE with an individual’s non-public personal information;
- notifying ICE of an individual’s release date, with few exceptions; and
- transferring an individual into ICE custody, with few exceptions. [Calif. Government Code §7284.6(a)]
This law shuts down the 287(g) agreements that exacerbated California’s foreclosure crisis by targeting Latino communities. By creating a sanctuary state, the California Values Act protects its most vulnerable communities, gives them an opportunity to invest in their neighborhoods and protects local real estate markets from economic instability caused by federal agencies.
Echa pa’lante! (Onward!)
California’s new statewide sanctuary policies are poised to lift a community of homeowners and renters out of the darkness. This will be a boon for California’s economy as immigrants account for two-thirds of economic growth in the U.S. since 2011, according to a Citigroup and Oxford University study. Despite immigration’s negative perception, it presents an unprecedented economic opportunity for California’s local industries, including real estate.
Real estate agents are in a unique position to capitalize on a growing population that needs homes. Because Fannie Mae and Freddie Mac only purchase loans held by legal residents, agents looking to take on undocumented clients will need to familiarize themselves with alternative mortgage products. For instance, prospective buyers can still become homeowners without a Social Security number by using an Individual Tax Identification Number (ITIN).
Obtaining an ITIN mortgage is more difficult than obtaining a traditional mortgage, so only those with exceptional financial histories may qualify. Because ITIN mortgages present a unique risk, homebuyers can expect higher down payments and rates than conventional mortgage products. Is your practice versed in the extra steps it takes for our 2.6 million undocumented immigrants to purchase homes? Find out more about ITIN mortgages here.
Learning the language of your area’s most populous immigrant community, be it Spanish or Mandarin, can also give your practice a competitive edge in hard-to-reach pockets of your service area.
Regardless of your feelings on its immigration policy, California continues to lure residents from around the world in every price tier. Is your practice ready for them?