How Trump’s deportation plan will drive up housing prices

• Donald Trump has promised to lead a mass deportation campaign after his election.
• This will create a severe labor shortage for home builders, driving up wages and costs.
• Here’s how Trump’s plans could hit the workforce and home prices for buyers.

Donald Trump’s promise to crack down on immigration doesn’t bode well for high-end homebuyers.

The Republican presidential candidate has vowed to lead the largest deportation campaign in US history if re-elected. According to one estimate, this could include deportation to 1.2 million people, although the same number 11 million residents without documents live in the country

While there is room for debate over the feasibility of the plan, there is no doubt that a sudden exodus of immigrant labor could significantly hamper U.S. construction, creating even greater unaffordability for domestic buyers.

An important workforce for house builders

“If we were to see mass deportations, I think it would have a terrible effect on the labor market,” Jim Tobin, CEO of the National Association of Home Builders, told Business Insider.

He said immigrants are a critical component of the industry because they help address a critical shortage of skilled labor. Foreign-born construction workers, who make up nearly a third of the sector’s workforce, are often concentrated in certain trades needed to build a home, such as plasterers and drywall installers, Home Builders Institute reported.

“We consistently see government data showing that there is a 200,000 to 400,000 labor shortage in our industry, and that the lack of skilled labor is slowing the pace of construction, increasing labor costs, and ultimately driving up prices for housing and a slowdown in home building,” Tobin said.

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AND 2022 George W. Bush Institute The study found that US metros with the highest immigrant growth have the lowest construction costs.

History shows that without the supply of these workers, housing prices are likely to rise.

According to A scientific work A report published earlier this year found rising house prices in countries affected by the crackdown on immigration that ran from late 2008 to 2014. The U.S. Secure Communities program resulted in the deportation of more than 300,000 illegal immigrants during that period, it said.

Given the pace of home building, the impact on prices was muted in the two years after enforcement began, according to the study. However, after three years, the average new construction home was 17% more expensive among the counties tracked compared to the baseline.

This represents a jump of $57,300 compared to the average property price before the program was implemented.

“Three years after SC deployment, the average county has lost the equivalent of a full year’s worth of additional housing construction, with 2,423 fewer buildings permitted and 1,997 new constructions entering the market,” the authors write.

Given how far-reaching the Trump campaign’s deportation efforts could be, experts told BI that developers are likely to resort to raising wages to attract domestic workers. This could be significant given that the construction industry will be competing with other immigrant-dependent sectors.

The mass deportation will also require industry to redouble its efforts to attract new domestic interest in the trade, Tobin said.

“Whether it’s kids graduating from high school or adults looking for a new career, transitioning military personnel coming out of the service. We will need to look at those who were previously imprisoned.”

What about demand?

Trump’s campaign hinted that cracking down on immigration would help reduce housing unaffordability by effectively eliminating one source of demand. That’s a point made recently by vice-presidential candidate J.D. Vance, who charged that “millions of undocumented immigrants” to increase pressure on the housing market with limited supply.

Although research suggests that immigrant demand plays a role in affecting prices, economists generally doubt that it main driver.

Rents and home prices began to rise sharply in 2020 and 2021, at a time when net immigration was close to its two-decade average, as tracked by Congressional Budget Office.

Meanwhile, Trump’s platform is also pushing another policy initiative that is unlikely to help lower housing costs: tariffs.

The candidate promised to raise tariffs on virtually all imports into the US, increasing them by 60% on Chinese imports.

“If you’re going to add tariffs on building materials, those costs are just going to be passed on to the homeowner or the renter,” Tobin said, citing that there is no evidence that the tariffs will significantly increase U.S. manufacturing. He pointed to 15% tariff on Canadian softwood lumber that could not do it.