Abstract
The arrival of immigrants increases demand for housing and puts upward pressure on shelter prices. Using instrumental variables based on the ancestry composition of residents in U.S. counties, the authors estimate the causal impact of immigration on local shelter prices. The results show that the impact of immigrants is heterogeneous across locations. The increase in shelter prices is greater in counties where immigrants have higher levels of education and in counties that issue fewer building permits. The authors also find that the house prices respond more to immigration than rent prices do. The larger issuance of building permits for multi-unit homes than for single-unit homes can reconcile the different price reactions. Based on empirical estimates, the predicted contribution of immigration to U.S. shelter price growth is small, around 2%, because the arrival of immigrants accounts for a small share in local population changes. Applying the estimates to population movements across counties within the United States, the empirical model can predict 50% to 60% of observed shelter price growth over the past 30 years.
Information
- Series: La Follette School Working Paper No. 2024-004
- Authors: James Cabral, Walter Steingress