Some commenters have been pushing back against my suggestion that immigration can fix our housing “unemployment” problem. In fact, a decline in immigration is a partly to blame for our current vacancy problem. Here is the 2010 State of the Nation’s Housing from the Joint Center for Housing Studies of Harvard University, emphasis mine:
The stubbornly high and rising overall vacancy rate—even with production near 60-year lows—reflects the fact that household growth has been running well below what would be expected in normal economic times. While there is some evidence that doubling up in shared quarters has been on the increase, the main explanation for the weakness of demand appears to be lower net immigration.
The connection between immigration and housing demand is fairly obvious: they need somewhere to live. I’m surprised that there is any disagreement here, but there you have it in any case.
We should be doing what we can to reverse this trend by removing barriers to immigration. Foreclosures generate externalities via decreasing neighboring properties, and they destroy credit, which is a real asset of households. Increasing nominal house prices would have positive real effects on the economy right now, and we are ignoring an obvious lever that we could and should be pushing on. In addition, vacant properties are “unemployed” resources, which is a problem all by itself.