For years, economists, policymakers and housing experts have debated the biggest drivers behind America’s housing affordability crisis. Mortgage rates, a shortage of new construction, investor activity and population growth have all been cited as major contributors.
Now, a new working paper from the Federal Reserve Bank of Dallas suggests another factor may have played a measurable role: the surge in unauthorized immigration between 2021 and 2024.
The paper, titled The Impacts of Unauthorized Immigration on U.S. Labor and Housing Markets: New Evidence from Administrative Microdata, analyzes how unauthorized immigrant worker flows affected local labor and housing markets across the country. The study was published as a working paper, meaning it is preliminary research that has not yet undergone peer review.
The researchers estimate that the influx increased home prices by roughly 6.6% and rents by about 4.3% in the average U.S. metropolitan area during the period they studied. They conclude that unauthorized immigration accounted for approximately 30% of observed home price growth and about 20% of rent growth in the average metro area.
The findings have drawn attention because housing affordability remains one of the nation’s biggest economic challenges. However, the paper stops short of suggesting immigration was the sole cause of rising housing costs.
Instead, the economists describe unauthorized immigration as an additional demand shock that occurred while housing supply remained constrained. In other words, more households were competing for a limited number of homes in markets where builders were unable to increase supply quickly enough.
The study also found that unauthorized immigrant worker flows increased local employment nearly one-for-one without significantly reducing average wages. At the same time, the additional demand placed upward pressure on home prices and rents because housing construction did not expand quickly enough to absorb the population growth.
Among the paper’s specific findings, every 1% increase in unauthorized workers relative to a local workforce was associated with approximately a 2.2% increase in home prices and a 1.4% increase in rents. Those figures represent average effects across metropolitan areas studied and should not be interpreted as the only drivers of housing inflation.
The authors also caution against overinterpreting the results. The analysis covers a relatively short timeframe, and over a longer period housing construction could expand to meet higher demand. They further note that the paper reflects the views of the authors and does not necessarily represent the views of the Federal Reserve Bank of Dallas or the Federal Reserve System.
The study is worth paying attention to because it puts numbers behind something economists have long understood: when demand rises faster than supply, prices increase. The Dallas Fed researchers conclude that unauthorized immigration added to housing demand during a period when builders were already struggling to deliver enough homes. That doesn’t make immigration the entire story, but it does suggest it is part of the story.
In my view, that’s the key takeaway. America’s housing affordability crisis wasn’t created by any one policy or any one administration. It has been decades in the making. Years of underbuilding, restrictive zoning and permitting requirements, rising material costs, elevated interest rates, a shortage of skilled construction workers and an aging workforce have all combined to limit the supply of new housing. Those structural challenges remain the biggest obstacles to making homeownership more affordable.
The Dallas Fed study adds another piece to the conversation by suggesting that increased immigration placed additional demand on an already undersupplied housing market. Ignoring that finding would be a mistake. But so would ignoring the larger structural issues that have constrained housing supply for years. If policymakers are serious about making housing more affordable, the answer isn’t choosing between supply and demand. It’s addressing both. That means building more homes, modernizing regulations that unnecessarily slow development, investing in the skilled trades and ensuring housing supply can keep pace with America’s changing population.
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