The rent is too damn high. If there is one thing that young people seem to agree on these days, it is that the rent is too damn high.
Many people blame increases in housing prices on increased immigration - among them the President of the United States. But it is not just in the US where this comes up; it is a talking point in Canada, Australia, and the UK. Is it true?
Yes, Increasing Immigration Likely Increases Housing Prices
The classic paper on this subject is Saiz 2007. An immigrant inflow resulting in a 1% increase in population increases rents and home values by about 1%.
Since then, a variety of papers have used shift-share instruments to estimate how much an increase in immigration affects housing prices: Kalantaryan 2014 (Italy), Degen and Fischer 2017 (Switzerland), Damm, Hassani, Kumar and Parra-Alvarez 2025 (Denmark), Gonzalez and Ortega 2012 (Spain). In general, these papers find that immigration increases the price of housing.1
The elasticity of house prices with respect to immigration seems to be around 0.5 - 3 - that is, for every 1% the population of an area increases through immigration, prices increase from 0.5% to 3%. This seems to be a pretty clear supply-and-demand story - immigration increases the demand for housing but it does not increase the supply.
However, I am a well-known hater of shift-share designs. Shift-share instruments rely on an exogenous prior distribution, and I don’t really buy this for immigration; they also confuse long-run and short-run effects (see Jaeger, Ruist, and Stuhler 2018 for a fuller explanation).
Thankfully for the validity of my conclusion, this evidence points in the same direction. A study using a difference-in-differences design in Turkey (Tumen 2016) finds that refugee inflows increase housing prices. Similar designs in Jordan (also with Syrian refugees) and Poland (with Ukrainian refugees) find similar results.2 Using yet another method, a model by Ottaviano and Peri also finds immigration increases housing prices; they find roughly the same elasticity as Saiz (0.6 - 0.8).
So: yes, immigration generally increases housing prices.3
Where Do Natives Go?
Implied in all this is that neighborhood composition changes. In many neighborhoods, natives will move out when immigrants move in.
The size of the price change will depend on how completely natives leave - if every immigrant moving in results in a native moving out, we’d see no demand change. If more natives leave than immigrants arrive and/or if the natives are richer than the immigrants moving in, prices might decrease. You’d expect to see a price increase only if fewer natives leave than immigrants move in and/or the immigrants are richer than the natives.
The latter seems to be what happens in most countries. The former - where immigrants displace richer natives - appears to be what happens in the UK.4
Why Is This Result Different Than For Jobs?
I have previously argued that increasing the population through immigration does not seem to decrease wages (even though the supply of workers increases). Somehow, that isn’t a supply-and-demand story, but housing is. Why?
I believe this is likely because housing supply is constrained in a way that job supply is not. The process for increasing housing supply does not neatly follow trends in immigration; immigration acts as an exogenous shock to the demand for housing.5 There are more people; there are not more houses; prices increase.
Jobs differ in two important ways. Firstly, immigration affects both the supply and demand for jobs. Immigrants generally desire to work a job - increasing the number of job-seekers - but they also buy goods, purchase services, etc., increasing the number of jobs available. This is not true for housing; most immigrants affect only the demand for housing, rather than the supply.
Secondly, the supply of housing is much more constrained by regulation than the supply of jobs. You do not need to get regulatory permission to hire someone; you generally do to build a house. If one believes Ed Glaeser (and I do), the reason that expensive cities are expensive is primarily this regulatory burden. That burden is completely unrelated to immigration.6
Wait A Second - What If Immigration Does Influence Supply?
There is one group of immigrants that does influence housing supply, though: immigrants that work in construction. About 11% of US immigrants work in construction and about a quarter of all workers in construction are immigrants.
An increase in the size of this group should increase the supply of housing, and thus drive down house prices. This acts in the opposite direction of the overall effect, and thus will reduce the overall effect size. It’s also already included in the estimates above; they are estimated using all immigrants, not just the ones who don’t work in construction.
But there is one important wrinkle. Decreasing the number of immigrants suddenly can decrease the supply of housing. Exploiting the rollout of the Secure Communities program in the US, Howard, Wang and Zhang 2024 finds that increasing the number of deportations also causes home prices to rise, because fewer homes are built.
So: more immigrants = higher home prices. Fewer immigrants = also higher home prices.
How Large Of An Effect Is This, Really?
On a US-wide basis, the effect of immigration on housing prices is quite small.
I pulled US census data on both the change in non-citizen population and Zillow data on home values from 2014 - 2024.7 The increase in the number of non-citizen residents and naturalized citizens over the 2014 - 2024 period resulted in a total population increase of 2.46%.8 Given the above, we’d expect this to cause (nominal) house prices to increase around 2.5%.9
The average home price in the US actually increased 87.9%. Thus, immigration caused about 2.8% of the increase in house prices over this period (assuming an elasticity of 1). This is… not that large.
Of course, immigration is highly heterogeneous across areas. Therefore, I also analyzed by state and metropolitan area.
Statewide, the effects remain pretty small. North Dakota had the highest contribution of immigration to house price increases, at 8.37%. The median contribution of immigration was just 1.95% of the total home value increase (across states).
There is more heterogeneity by metropolitan area. It is plausible that all of the house price increases in Oxford, Alabama were due to immigration.10 If you live in Odessa, Texas you might be able to blame about 12% of the increase in house prices on the increase in immigration. Other than that… well, the median contribution of immigration to house price increases is just 1.09%. In San Francisco, it’s 2.79%. Over that decade, home prices in San Francisco increased 88%, but the vast majority of that increase was not due to immigration.
Nor are immigrants the reason the rent is too damn high. Rents and house prices are correlated but not identical; it is therefore worth examining both. Also, Peter Navarro says that “an estimated 20 million illegal entrants during the Biden years [increased rents]... 20 percent”.
This is obviously not true, because in the period 2020 - 2024, rents only increased 30.4%; illegal immigration did not drive two-thirds of rent increases. How much did it actually drive?
I don’t have data on non-citizen population count for 2020, so I looked at 2019 - 2024 data. During this time, the population increased by 1.74% due to immigration. Rents also have an elasticity of around 1 with respect to population increase, which would imply that rents would increase around 1.74% due to immigration. Peter Navarro is, shockingly, not correct.
Overall, immigration caused perhaps 4.3% of rent increases 2015 - 2024.11 The cities most affected by immigration-caused rent increases were Houston, Texas, Austin, Texas, and San Jose, California, but even in these cities, immigration caused perhaps 20% of rent increases. Note that this is not a 20% overall increase; immigration caused perhaps 20% of a 25% - 40% rent increase, so immigration caused rents to increase around 5 - 9% in the most affected metros in the country. This just isn’t very big!
The vast majority of the increase in both home prices and rent prices in the last decade isn’t due to immigration. Immigration does increase house prices, but not very much.
What About Foreign Investment?
In some supply-constrained cities, the concern is not about immigrants per se. Instead, the concern focuses on foreign investment properties - rich foreigners speculatively buying property as an investment vehicle. Some but not all of these foreign nationals will actually live there; some apartments will be second homes that sit empty much of the time. (The quintessential example of this is One Hyde Park, where most of the $50M+ apartments are unoccupied second homes.)
There are a couple of papers that look at this channel specifically. Sá 2025 examines foreign investment in housing in the UK, and finds that foreign buyers are responsible for 20% of the home price increase 1999 - 2019. This is actually a large increase, much larger than the effect from immigration.12 Interestingly, she finds no evidence of a widespread “One Hyde Park” effect - more foreign owners do not increase the vacancy rate in a municipality. It seems that rich foreign owners use their investments to generate rental returns, rather than leaving them to moulder.
Evidence from Canada shows smaller effects. In 2016, British Columbia introduced a tax that applied to foreign buyers only. Prices in neighborhoods with many foreign buyers declined around 6% relative to neighborhoods with few. This is larger than the effect from immigration, but still relatively small.
Are Increased House Prices Bad?
It is worth taking a moment to pause on the distributional effects of increased house prices. As a renter in a major city, clearly increased housing prices are bad for me.13 Rising house prices are bad for anyone who does not yet own a house and desires to do so in the future.
But in many countries,14 owner-occupiers are the norm, and housing is a significant proportion of wealth. One could make an argument that increasing house prices are good.15 Indeed, one could make the argument that rising house prices benefit homeowners (particularly likely to be natives) and hurt recent arrivals (more likely to be immigrants). Home-owning residents of Odessa, Texas haven’t been hurt by increasing house prices; indeed, they’ve gained wealth specifically due to immigrants.16
Does this outweigh the negative impacts on renters? I don’t think so, because excessive planning restrictions likely reduce aggregate economic growth. But if you are not generally a YIMBY / pro-additional housing supply, perhaps you should be thanking immigrants for increasing the wealth of your native-born countrymen.
These papers alleviate the exogeneity concern from Jaeger, Ruist, and Stuhler 2018, but are (by construction) short-run estimates, so they don’t alleviate all the concerns.
As further validated by a systematic review of 45 studies. But the systematic review doesn’t have fun digressions about shift-share instruments.
Don’t worry, I’ll complicate this model in a second.
Most immigrants can’t vote, so they have little influence on the regulatory process. Maaaaaaybe you could argue that immigration increases NIMBY tendencies, but that seems tenuous at best.
Specifically, one-year ACS data matched to Zillow data for all 50 states, 472 metros (for house price data) and 219 metros (for rent data). Thank you, Claude Code. The GitHub repo for the analysis is here.
I combine both the increase in the number of foreign-born but naturalized American citizens and the increase in the non-citizen population for an overall immigration effect.
For computational simplicity, I’m using a single number from Saiz. In a later paper, Saiz finds that the supply elasticity of housing varies by geography; it is likely the price elasticity does as well. But the population increase is small, and even substantial changes to this elasticity by region would… still result in a small effect size.
But also home prices only went up 2.1% over that decade. Don’t buy a house in Alabama.
Though from 2015 instead of 2014, because Zillow’s rent data only starts in 2015.
This paper was used to justify an increase in stamp duty for non-UK residents.
Though I am also an immigrant, so hoist on my own petard, etc.
This argument has recently been made by Donald Trump. Given he has also complained immigrants drive up demand for housing, I begin to think it is perhaps not the housing that is the problem for him…
Perhaps they will even have enough money to no longer live in Odessa.