Federal Reserve Working Paper Finds Biden-Era Illegal Immigration Surge Accounted for Substantial Share of U.S. Home Price and Rent Increases

A new working paper from economists at the Federal Reserve Bank of Dallas and San Francisco estimates that the record wave of unauthorized immigration during the Biden administration significantly boosted local employment but acted as a major demand shock in U.S. housing markets, driving up home prices and rents in many areas while housing supply failed to keep pace.

The paper, titled “The Impacts of Unauthorized Immigration on U.S. Labor and Housing Markets: New Evidence from Administrative Microdata,” provides one of the first systematic analyses using detailed administrative data on the post-2020 immigration surge. It attributes roughly 30% of house price growth and 20% of rent growth in the average local market to unauthorized immigrant worker flows between early 2021 and early 2024.

Key Findings on Housing Markets

Researchers Daniel J. Wilson and Xiaoqing Zhou constructed measures of net unauthorized immigration at national and local levels by combining immigration court records, Customs and Border Protection parole data, and Department of Homeland Security estimates of “got-aways.” They exploited variation across local markets to identify effects.

The analysis found that an increase in unauthorized immigrant worker flows equal to 1% of a local area’s initial employment raised local house prices by about 2.2% and market rents by about 1.4%. These effects held across different housing segments, with slightly larger impacts on multi-family rents.

Over the boom period, weighted-mean house prices rose 22.4% and rents 22.6% nationally in the studied markets. For the average metropolitan statistical area or commuting zone, the immigration inflows explained approximately 30% of the total house price increase and 20% of the total rent increase.

Importantly, the study found little evidence that new housing construction or permits expanded enough to absorb the added demand. Construction-sector employment effects were muted, consistent with a demand shock hitting markets where housing supply was already inelastic in the short run.

Labor Market and Broader Economic Effects

On the labor side, the inflows increased local employment roughly one-for-one with no statistically significant overall declines in local wages. The researchers estimate these flows accounted for about 30% of total employment growth in the average local market during the period.

However, the paper also documents negative effects on labor income per capita, consistent with shifts in workforce composition, and a strong reduction in government transfers per capita — approximately 5% lower for each 1% increase in unauthorized immigrant worker flows relative to initial local employment.

The analysis covers the surge period from March 2021 to March 2024, followed by a slowdown beginning mid-2024. Effects were identified using a shift-share instrumental variables approach based on historical settlement patterns and plausibly exogenous variation.

Context of the Immigration Surge

The findings come amid record levels of illegal immigration encounters and releases under Biden administration policies, including expanded parole programs and changes in enforcement priorities. Official data showed millions of encounters at the southern border, with significant numbers released into the interior pending proceedings or through other pathways.

Housing markets nationwide faced tight supply conditions even before the surge, with years of underbuilding relative to household formation. The additional population pressure from the immigration wave amplified demand in many metropolitan areas without a corresponding supply response.

The working paper is a preliminary draft circulated for comment and does not necessarily represent the views of the Federal Reserve Bank of Dallas, the Federal Reserve Bank of San Francisco, or the Federal Reserve System.

Implications for American Families and Policy

The research underscores how large-scale unauthorized immigration can create localized pressures on housing affordability even as it expands the overall labor force. American families, particularly in high-inflow areas, faced higher costs for buying or renting homes at a time when wages for many workers did not keep pace with shelter expenses.

These dynamics align with broader concerns about the fiscal and economic burdens of unchecked illegal immigration, including strains on public services and infrastructure. The paper’s estimates of reduced per capita income and transfers highlight distributional effects that fall on existing residents and taxpayers.

With enforcement and border policies shifting under the current administration, sustained reductions in illegal inflows could help ease some of these housing market pressures over time by aligning population growth more closely with housing supply responses.

The Dallas Fed working paper adds rigorous, data-driven evidence to ongoing debates over immigration’s economic impacts, showing clear trade-offs between labor market expansion and housing cost increases for American households. Further research building on these administrative microdata approaches will likely refine understanding of these effects across different regions and time periods.