Immigrants impact California’s real estate profession

A large population of international immigrants have the potential to give California’s homeownership rate the boost needed to catch up with the rest of the country. It all starts with positive immigration reform.

Immigration reform for growth

Beginning January 1, 2016, the California Bureau of Real Estate (CalBRE) will allow individuals to become licensed real estate agents and brokers, regardless of their immigration or citizenship status. This change in licensing law comes along with many other immigrant-friendly laws in California.

California is one of:

• ten states which allows individuals to apply for driver licenses, regardless of immigration status;
• 20 states which allows unauthorized immigrants to attend college at in-state tuition rates;
• 15 states which supports President Obama’s executive action to give work permits to four million unauthorized immigrants (1.2 million in California), protecting them from deportation, according to the New York Times; and
• three states which prohibits a law enforcement official from detaining someone (once charges have been dropped or bail has been posted) due to a S. immigration policy unless they have committed specific crimes. This allows law enforcement to focus on dangerous criminals instead of unauthorized immigrants, according to the Immigration Legal Resource Center. [Calif. Government Code §7282]

To obtain their real estate license, each applicant will need either a Social Security number (reserved for U.S. citizens) or an individual tax identification number (ITIN). They are also required to fulfill all licensing education requirements.

Editor’s note — Homebuyers lacking a social security number can also use an ITIN to take out a mortgage, though some lenders screen for immigration status.

Reform opens the doors to homeownership

Authorizing undocumented immigrants to act as licensed real estate agents is a positive step for California’s homeownership rate, which is at 54.4% in the second quarter of 2015. This is well below the 63.3% average U.S. homeownership rate. However, with more than 6% of California’s population and 9.4% of workers consisting of unauthorized immigrants (according to the Public Policy Institute of California) our low homeownership rate makes some sense.

That’s because only a small percent of non-citizen immigrants are currently homeowners. The homeownership rate of unauthorized immigrants living in the U.S. for at least ten years is roughly 45%, according to a report by the National Association of Hispanic Real Estate Professionals (NAHREP).

Consider a gainfully employed individual who has the desire and means to become a homeowner, but who is an undocumented immigrant. The run-of-the-mill real estate agent is unlikely to know how to help this individual overcome the unique barriers placed between them and homeownership due to their immigration status. However, an agent who is personally familiar with these obstacles is most suitable to assist qualified, unauthorized immigrant homebuyers.

Areas where unauthorized immigrants make up a significant share of the population will likely see a larger boost in homeownership in the coming years. Take a look at this map by the Public Policy Institute of California, which shows the highest share of unauthorized immigrants concentrated in central California:

Source: Public Policy Institute of California

However, as far as pure numbers go, Los Angeles County has the largest population of unauthorized immigrants, at 815,000 as of 2013. Orange County is a distant second, followed by Santa Clara and San Diego counties.

Many unauthorized immigrant families are cut off from the possibility of homeownership due to:

• being unaware of their ability to buy a home in California without a social security number;
• being too worried about deportation to apply for a mortgage; or
• having insufficient access to funds.

However, with access to a licensed real estate agent who is also an unauthorized immigrant, some of these obstacles may be more easily navigated and overcome.

Immigrant homeowners: a success story for everyone

Over the past twenty years, one-third of the net growth in U.S. homeowners has been due to unauthorized immigrants purchasing homes, according to NAHREP.

The homeownership rate amongst this population increases further when pathways are created for unauthorized immigrants to become citizens. The NAHREP report claims residential construction spending has the potential to increase by $68 billion annually over the next 20 years — with proper immigration reform. This may have even more of an impact on the housing market, since unauthorized immigrant workers hold a disproportionate number of jobs in the construction industry, according to the Public Policy Center of California.

As for real estate sales transactions, immigrants who have been able to become U.S. citizens have the potential to contribute $180 billion in real estate costs, which leads to a correlated increase in consumer spending, according to NAHREP.

All of this spending can be great for the economy — if it has a chance to happen, of course. The NAHREP report and the Bipartisan Policy Center claim future immigration reform has the potential to:

• reduce the cumulative federal deficit by $570 billion;
• grow the U.S. labor force by 8.4 million without taking away from average worker wages;
• increase economic growth by 4.8%; and
• increase gross domestic product (GDP) by 0.5%.

On the other hand, stifling immigrant access to legal employment and citizenship is expected to have the opposite effect, by:

• increasing the federal deficit by $100 billion; and
• reducing GDP by 1.5%.

For the housing market, this translates directly to more transactions and eventually more single-family residential (SFR) construction.

Related article:

LowerMyBills.com: How To Buy a Home as an Immigrant

Your thoughts on immigration

In a 2013 poll of first tuesday readers, just under half of respondents said immigration reform will make a positive impact on California’s housing market. One-third of readers said it will make a negative impact and one-fifth said it will have no effect.

Now that 2015 is here and immigration reform continues to progress, what are your thoughts on immigration’s influence on the housing market?