Fed Study: Illegal Immigration Drove Up U.S. Home Prices by $30,000

A draft working paper from the Federal Reserve finds that illegal immigration was responsible for 30 percent of the increase in U.S. home prices between 2021 and 2024, raising the average price of a new house by $30,000 during that period. The study, cited by The Federalist, attributes the surge to a "housing demand shock in the face of short-run inelastic supply" as millions entered the country illegally.

The report's findings add new urgency to the debate over housing affordability, as Americans face rising costs and limited supply while policymakers weigh the economic impacts of immigration.

The Federal Reserve researchers concluded that at least seven million people entered the U.S. illegally from 2021 to 2024, increasing home prices by 6.6 percent and rents by 20 percent. The study found that the influx did not expand housing supply, as most new immigrants were not employed in construction or related industries. Instead, the added demand intensified competition for existing homes.

Housing Prices and Immigration Data

According to the U.S. Census Bureau, the median price of new houses sold in January 2021 was $346,400, with the average at $408,800. By January 2025, those figures had risen to $446,300 and $510,000, respectively, an increase of about $100,000 each. The Federal Reserve study attributed $30,000 of that rise to illegal immigration alone. Net international migration to the U.S. totaled 7,179,000 people from 2021 to 2024, according to Census Bureau data, a figure that includes both legal and unauthorized immigrants and is offset by emigration and net mortality. The Center for Immigration Studies (CIS) estimated the net increase at 8.3 million, noting this is larger than the population of 38 individual states.

The study emphasized that legal immigration further increased housing demand and prices, given the inelastic supply. The 2008 financial crisis had already reduced the annual growth of America's housing stock below historical averages, compounding the effect of population growth.

Employment and Welfare Use Among Immigrants

The CIS found that less than half of immigrants who arrived in 2022 or later were employed in the first quarter of 2024. Many new arrivals were children, elderly, disabled, or caregivers. The report also noted that able-bodied immigrants were less likely to work than U.S.-born men without a bachelor's degree, with labor force participation among the latter dropping from 20% in 2000 to 28% in January 2025.

CIS Director of Research Steven Camarota testified to Congress in 2024 that 59 percent of households headed by illegal immigrants used one or more major welfare programs, compared to 39 percent of U.S.-born households. The CIS also found that 39 percent of such households used Medicaid in 2022. Camarota estimated the per-person lifetime fiscal drain of illegal immigrants at $68,000 due to higher use of government benefits than taxes paid.

"In sum native working-class renters faced decreasing wages as illegal aliens flooded into the job market, and they also took the brunt of the housing cost increase as demand for apartments and multi-family housing grew."

— Federal Reserve study, as cited by The Federalist

The Foundation for American Immigration Reform estimated that educating the children of immigrants cost taxpayers $78 billion in 2022, and emergency medical care for people in the country illegally added $7 billion annually, according to Camarota's congressional testimony.

Other Drivers of Housing Costs

While illegal immigration accounted for about 30 percent of the home price increase during the Biden administration, the Federal Reserve study and The Federalist noted that at least 40 percent of the rise resulted from other factors. These included overall price inflation, higher interest rates from federal debt payments, and restrictive government regulations that limited new housing supply and raised costs for fuel and other necessities.

The Federal Reserve researchers found that the employment of unauthorized immigrants in the housing industry did not expand output, while their presence and that of their families increased demand and drove up prices. The study concluded that the expected boost in housing supply from increased immigration did not materialize during the period examined.

Advocates for increased immigration often argue that newcomers fill critical labor shortages and contribute to economic growth. However, the Federal Reserve study and CIS data suggest that the demand-side effects of mass immigration, particularly on housing and public benefits, have imposed significant costs on working Americans. Supporters of current immigration policies have not directly addressed the Federal Reserve study's findings.