Jon Huntsman made the important and underappreciated argument that immigration could help lift housing markets:
“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.”
Suzy Khimm at the Washington Post attempts to throw some cold water on Huntsman’s argument, but I think she gets it wrong. Or more accurately, economist Paul Dales, whom she quotes, gets it wrong. He argues that immigration wouldn’t be significant enough to sop up the excess demand in housing and thus wouldn’t make much of a difference:
…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
There are a couple big missing pieces here. First off, what level of immigration is Dales talking about? If an extra 100,000 a year more isn’t enough, then we can let in an extra 3 million. From his own numbers, this would likely sop up the excess supply, so surely a sudden influx of a large enough amount would make a significant dent in the market.
Second, he’s ignoring the role of expectations. If we commit to some higher level of immigration each year over the next decade, than that changes the expectations for developers about the level of demand they will face, and should help spur development immediately.
I’m glad to see this issue getting discussed, and really glad to see a high profile Republican proposing it, but so far I’ve yet to see an economic argument against it that can’t be solved by increasing the proposed number of immigrants. The argument that such a policy is politically unfeasible is surely in part a function of the fact that journalists and economists aren’t constantly reminding people that, political feasibility aside, more immigration represents one of the best available policies to attack this recession.