A new Federal Reserve working paper found the record surge in illegal immigration during the Biden administration came at a cost to one of the nation’s fiercest political debates: higher home prices and rent rates.
The findings arrive as immigration remains a defining political issue, with Republicans arguing former President Joe Biden’s border policies strained housing and public resources while Democrats have pointed to immigration as helping ease labor shortages and support economic growth.
The new report, published by the Federal Reserve Bank of Dallas by compiling individual immigration court records and government administrative data, is among the first comprehensive efforts to measure how the unprecedented wave of illegal migration between 2021 and 2024 impacted local economies and affected local labor markets.
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The authors cautioned that the paper is a preliminary draft circulated for professional comment and that its findings do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System.
Researchers found the influx of illegal immigrants boosted local employment with little measurable effect on wages, but came with a trade-off of increasing housing demand enough to drive up home prices and rents.
The researchers found that illegal immigrant worker inflows increased local employment “approximately one-for-one,” meaning a 1% increase in unauthorized workers relative to a local area’s workforce corresponded with roughly a 1% increase in overall employment. The study found no evidence that the immigration surge lowered average wages.
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That 1% increase in illegal immigrant worker flow, however, raised local home prices by about 2.2% and rents by roughly 1.4%, while finding little evidence that new housing construction expanded enough to absorb the increased demand, according to the study. So while wages remained relatively stable due to the influx of illegal immigration, housing prices and rent surged and left American workers struggling to keep up.
The housing crisis has heavily impacted affordability in the U.S. and is a key midterm issue for many voters on both sides of the political aisle.
Researchers concluded the influx of illegal immigrant workers acted as a housing demand shock in markets where supply remained relatively constrained.
The authors argued the increase in housing demand outpaced homebuilding in many areas, amplifying price pressures where housing supply was already limited.
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The economists estimate illegal immigrant worker flows accounted for roughly 30% of employment growth in the average local labor market between March 2021 and March 2024.
They also estimate those inflows explained about 30% of home-price growth and roughly 20% of rent growth in the average metropolitan area over the same period.
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The findings suggest the recent immigration surge had different effects across sectors—expanding the labor force without significantly affecting wages while increasing demand in housing markets where supply struggled to keep pace. The estimates refer to the average metropolitan area in the study and do not suggest immigration was the sole driver of rising housing costs nationwide.
The paper describes the years between 2021 and 2024 as an “unprecedented boom” in illegal immigration. Citing Congressional Budget Office estimates, the authors said net unauthorized immigration added roughly 7 million people to the U.S. population during that period before slowing sharply beginning in mid-2024.
The researchers also examined government spending and found areas with larger increases in unauthorized immigrant workers experienced declines in government transfer payments.
They suggested the finding could reflect stronger employment and lower use of safety-net programs among working-age immigrants, while acknowledging the result differs from some previous survey-based research.
Read the full report here:
