Huntsman thinks more immigration would revive the housing market. Could it?
Jon Huntsman, ever the internationalist, suggests that the U.S. could revive its ailing housing market by following Canada’s example. “Why is it that Vancouver is the fastest growing real estate market in the world today? They allow immigrants in legally and it lifts all boats. We need to focus as much on legal immigration,” he said during Wednesday’s Republican debate. But given the magnitude of the U.S. housing crisis, would a rise in immigration really bolster the real-estate market?
In the long term, Huntsman’s argument holds some water: A number of studies have shown that higher levels of immigration increase housing prices. Adam Ozimek points to research by Albert Saiz, an University of Pennsylvania economist, who found that immigrants were responsible for a third of the country’s housing market growth between 2001 and 2007. Saiz estimated that an increase of immigrants equivalent to 1 percent of the U.S. population raises housing prices by the same proportion. A study released last year by Swiss National Bank pegged a 1 percent rise in immigration to a 2.7 percent rise in single-family home prices.
But in the short term, the impact may be comparatively negligible. More immigrants overall could have a “marginally positive” effect on the U.S. market by buying vacant homes, but “any impact would be almost unnoticeable” on a national scale given the magnitude of the excess supply, says Paul Dales, a Toronto-based economist for Capital Economics, a research firm. Dales estimates that the overhang is at least one million, and potentially as high as three to four million homes. So even a sudden influx of immigrant homebuyers wouldn’t be enough to make a dent in the market, realistically speaking.
As for Canada’s real-estate boom, immigration “probably has been relevant, but probably doesn’t explain most of it,” concludes Dales. “It’s a very slow-moving factor that affects supply in housing. What we’ve had a very sharp increase in housing.” To be sure, Vancouver’s long-standing Chinese immigrant population — which makes up 20 percent of its population — has helped lure overseas Chinese investment. But on the whole, Canada’s real-estate market may have benefited even more from the country’s commodities boom that’s increased the value of its vast natural resources and protected the country from the U.S. bust.
That being said, there is growing interest from foreigners who want to immigrate to the U.S. for the very purpose of investing in the economy at large. The little-known EB-5 visa program lets prospective immigrants come to the U.S. by investing at least $500,000 in a venture that creates at least 10 jobs in rural areas or places with high unemployment. The program, which is capped at 10,000 visas, has seen a rise in applicants since 2006, raising hopes among real-estate developers that the program could inject much-needed cash into the housing market.
But so far, only 4,000 people at most have received EB-5 visas in any given year, which some blame on the program’s red tape and requirements. Angelo Paparelli, a business immigration attorney based in Los Angeles, says that a visa option more focused on investment in the housing market could be more successful. Would-be immigrants willing to buy new homes could receive “something less than a green card, it would be less controversial. The UAE has just done this with three-year resident’s visa,” Paparelli says. Canada, similarly, has a much simpler system for attracting immigrants who want to invest significant sums in the country, he adds.
Some local communities and businesses have already pinned their hopes on foreign investment that’s slated to come in through the existing EB-5 program, as one paper in Amarillo, Tex., explains. And given the duration of the slump, real-estate developers and others may want to drum up investment and homebuyers wherever possible.