No, Immigration isn’t raising your rent
In the world according to JD Vance, immigrants are the root of all evil. During his debate with Tim Walz, he argued that they’re responsible for rising housing prices. Economists were quick to point out that his “evidence” was an out-of-context quote from a speech from one Federal Reserve official. Still, immigrants are people, and people need housing. So could the recent rise in immigration be a major factor in the recent surge in housing costs?
There are multiple reasons to say no; one of them, which I’ve been working on, is timing. Basically, most of the surge in rents took place in 2021, and a big jump in immigration began in 2022. … Rents shot up as we came out of the pandemic slump; the big rise in immigration came later.
So what caused a surge in rents? A failure to build housing and more people working from home.
Source: The New York Times, by Paul Krugman
And rising accommodation costs are not a peculiarly American story.
The history of housing involves a once-unremarkable asset class turning into the world’s largest. Until about 1950, the rich world’s house prices were steady in real terms (see chart 1). Builders put up houses where people wanted them, preventing prices from rising much in response to demand. The roll-out of infrastructure in the 19th and early 20th centuries also helped temper prices, argues a paper by David Miles, formerly of the Bank of England, and James Sefton of Imperial College London. By allowing people to live farther from their place of work, better transport increased the amount of economically useful land, reducing competition for space in urban centres. Events that followed the second world war turned all these processes on their heads, creating the housing supercycle that we live with today. Governments got into the business of subsidising mortgages. People in their 20s and 30s were having many children, boosting the need for housing. Urbanisation raised demand for shelter in places that were already crowded.
The second half of the 20th century brought a slew of land-use regulations and anti-development philosophies. It became harder to build infrastructure, making cities less expandable. Metropolises that had once built housing with aplomb, from London to New York, applied the brakes. Across the rich world, construction of houses expressed as a share of the population peaked in the 1960s, then fell steadily to about half its level today. House prices began to move inexorably upwards.
Source: The Economist