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Immigrants and Housing Demand

Special Studies, August 3, 2012
By Natalia Siniavskaia, Ph.D.
Economics & Housing Policy
 
Report available to the public as a courtesy of HousingEconomics.com
 

A recent decline in immigration has been largely attributed to the struggling US economy and especially loss of jobs that typically attracted a large share of foreign-born workers. A previous article looked at the connection between immigrants and the construction labor force. This study explores how immigrants affect US housing demand.

 

NAHB analysis of the Census Bureau’s American Community Survey (ACS) data shows that immigrants’demand for housing depends on factors like age, region of their origin, and length of time in the United States. This article presents results from a model that estimates rates at which immigrants form households, move into multifamily units and single family homes and choose to rent or buy homes.

 

Assuming that net immigration of 1.2 million – the low end Census Bureau projection for 2010 - persists for 10 years, the model estimates that after ten years new immigrants will:

  • account for close to 3.4 million US households
  • occupy more than 2 million multifamily units and more than 1.2 million single family homes
  • account for more than 900 thousand home owners

Immigrants in the American Community Survey

The ACS replaced the decennial Census long form and provides the same detailed information about the country of origin, age, family status and housing choices of newly arrived immigrants. As such, these data allow accounting for varying headship, ownership rates and tendencies of immigrants of different age, origin and length of stay to live in multifamily units rather than single family homes.

 

Table 1 displays the distribution of newly arrived immigrants by age and region of origin.[1] It is based on the 2010 ACS and includes immigrants that arrived to the US since 2009. The data show that new immigrants are a young and diverse group of people. More than two thirds of them are under age 35. Close to 42 percent of newly arrived immigrants come from Asia and another 40 percent come from Americas. European immigrants account for additional 10 percent of newly arrived immigrants, and the remaining 8 percent are accounted for by other regions.

 

 Table 1. Newly Arrived Immigrants by Age and Region of Origin

 

Comparison of the 2010, 2009, 2008 ACS data reveals some trends (see Figure 1). The share of Asia-born immigrants is on the rise, the share of Mexican immigrants is sharply declining. The increase in the share of immigrants from the rest of Americas only partially offsets the declining share of Mexico-born immigrants. Whether these trends are permanent or a temporary result of a current slowdown of the US economy and loss of jobs that typically attract Mexican immigrants [2] remains to be seen.

 

Figure 1. Newly Arrived Immigrants by Region of Origin, 2008-2010

 

Immigrant Households

The number of housing units demanded by immigrants depends on their tendency to form households. The decision of adults to establish their own households rather than live with parents, other relatives or friends depends on many factors, including income, family status, tastes and preferences for independent living and other socio-economic and cultural characteristics. Conveniently, age of adults is a good indicator of where they might be in their life cycle and how likely they are to run their own households. These differences are captured by headship rates (the share of people who are household heads) varying by age.

 

The ACS data also show that headship rates vary predictably by region of immigrant origin. The in-depth data analysis suggests that region of origin reflects significant differences in income and socio-economic background of immigrants that, in turn, directly determine their ability to run independent households. The 2010 ACS data show, for example, that European-born immigrants generally have the highest personal income among all immigrants, close to $40,000 per year. This is more than double of what an average Mexico-born immigrant is making in the US and even exceeds an average for native-born Americans. It is not surprising then that headship rates for European-born immigrants are consistently higher than those of Mexico-born immigrants across all age groups (see Table 2).

 

For households with US-born heads the headship rates tend to rise with age. For immigrant households headship rates are highest for households lead by 45-54 year old heads, and start to decline for older heads of households. This is probably a reflection of cultural preferences of older immigrants to move in with their children or other relatives rather than continue living independently. This is especially true among the Asia-born population, where it is a cultural norm for young adults to take care of their aging parents and lead multi-generational households. Only 41 percent of the Asia-born population aged 65 and over lead a household, by far the lowest headship rate in this age group. The exception to this rule is European immigrants, their headship rates continue to rise with head’s age similarly to the native-born population.

 

Table 2. Headship Rates by Age and Region of Origin (including institutional Population)

 

 

In general, immigrant households have lower headship rates than native-born Americans. However, a closer examination of data shows that as duration of their stay in the United States increases the immigrant headship rates tend to rise. In case of European-born and other immigrants, their headship rates eventually exceed those of the native born population. Therefore in estimating headship rates of immigrants, the NAHB models accounts not only for region of their origin and age but also for duration of their stay in the United States.

 

Immigrant Homeownership

A fundamental decision for an immigrant household is whether to own or rent a home. Like headship rates, rates of homeownership tend to rise with age until late 60s. The 2010 ACS data show that the native born population generally reaches the highest ownership rates around 65-74 years of age. For immigrants, ownership rates peak a bit earlier, in the 60-64 age group, with the exception of Western Hemisphere (excluding Mexico) and other immigrants whose ownership rates peak at 65-74. Not surprising, Europe- and Asia-born households register the highest homeownership rates among all immigrants, reflecting their elevated socio-economic status in the US.

 

Table 3. Ownership Rates by Household Head Age and Region of Origin

 

The ACS data show that compared to the native population, immigrant households are more likely to rent than own across all age groups but that is largely the result of being new in a foreign country. Immigrant ownership rates increase rapidly with length of stay in the United States.

 

Immigrants by Structure Type

The ACS data also show that as household heads age, they are more likely to move into single family homes (see Table 4) and less likely to remain in multifamily units. The trend persists until a household head reaches 55 to 64 years of age. At this point, shares of seniors living in single family homes start to decline, probably reflecting desire of some older households to downsize. The trend seems equally viable for the native-born population and immigrants. The only exception is Mexico-born householders that do not show a tendency to trade single family homes for multifamily units even as they age into the 65+ age group.

 

Table 4. Share of Households Living in Single Family Homes

 

Compared to the native-born population immigrants are less likely to live in single family homes. This holds true across immigrants of all origins. However, the longer immigrants stay in the US the more likely they are to move into single family homes, presumably as a result of rising income and more stable socio-economic status. For most of the immigrant households, the main alternative to a single-family home is a multifamily condominium or rental apartment, although a small share will occupy less common types of housing units, such as mobile homes, trailers, RVs, boats, etc.

 

Housing Demand Projections

To predict future housing needs of immigrants, NAHB developed a model that takes into account age of newly arriving immigrants, region of their origin and length of stay in the United States. The model assigns probabilities of becoming a head of household, purchasing a home and moving into single family or multifamily property based on immigrants’ characteristics. These probabilities are derived from logistic regressions that are run separately for headship rates, ownership rates, and choice of housing unit (single family, multifamily, or other). The regressions are estimated based on the 2008, 2009, 2010 ACS data. The predicted headship, homeownership rates and probabilities of moving into a single family or multifamily properties are then averaged over 2008-2010.[3] They can be then applied to a given number of immigrants to show how a change in the rate of immigration—which might result from, for example, new federal policies or shifting economic conditions-- would ultimately affect demand for housing (assuming immigrants arriving into the country continue to behave as they did on average over the 2008-2010 period).

 

For purposes of illustration, the model is applied to the Census Bureau’s low-end 2010 projection of 1.2 million net immigrants.[4]The NAHB model predicts that during the first year of stay these new immigrants will form close to a quarter million of households. But after they have been in the country for ten years, their headship rate will increase and these immigrants will account for more than 400 thousand households (assuming immigrants will remain in the US and applying average US death rates to each age group).

 

Upon their arrival to the US, the NAHB model projects that more than three quarters of new immigrants will choose multifamily units and other housing arrangements and only 24 percent will move into single family attached or detached units. The share of newly arrived Asia-born householders moving into single family homes is projected to be even lower during the first year in the US, less than 17 percent. As immigrants gain socio-economic power and stability, their preference for multifamily units is expected to diminish and after ten years in the US, close to 50 percent of immigrants are projected to move into single family units. For Europe- and Asia-born households the model projects even higher shares, with more than half of these households living in single family homes after ten years in the US.

 

The models projects that most of newly arrived immigrants will become renters during their first years in the Unites States. As a matter of fact, only one out of ten new immigrant households are expected to purchase homes during their first year in the US. New immigrants from Asia are even less likely to own, while immigrants from the Western Hemisphere (excluding Mexico) are expected to show highest homeownership rates upon their arrival, more than 20 percent. After ten years in the United States, immigrants are projected to have homeownership rates in excess of 40 percent. Households of European and Asian origin are expected to have the highest homeownership rates among all immigrants, around 56 and 47 percent respectively.

 

Figure 2. Tenure Choices of New Immigrants over the Next 10 Years

If net immigration of 1.2 million persists for 10 years, new immigrants are projected to account for close to 3.4 million US households (see Figure 2). They are estimated to occupy more than 2 million multifamily units and more than 1.2 million single family homes (see Figure 3). More than 900 thousand of these new immigrant households are projected to become home owners. These estimates are likely to underestimate the full effect of new immigrants on housing demand, since the model accounts neither for possible second home purchases nor additional vacant units necessary to accommodate the normal turnover of a larger housing stock.

 

Figure 3. Housing Choices of New Immigrants over the Next 10 Years

 

 

[1]For brevity, the age distribution in the table is displayed by 10-year age groups. In practice, the NAHB Economics analyzes and models new immigrant housing demand by 5-year age groups.
[2]See N. Siniavskaia “Immigrant Workers in Construction”, Housing Economics Online, December 2005 http://www.nahb.org/generic.aspx?genericContentID=49216
[3]The logistic analysis is performed across several subgroups (domain analysis), defined by the region of immigrant origin. This helps to account for non-linear changes in headship and ownership rates by age within each subgroup. Averaging across three years is done to lessen sampling variability from one year to another.
[4]Reflecting uncertainty, the US Census Bureau creates two scenarios for high and low net international migration. Under the high scenario, net annual immigration will increase from 1.5 million in 2010 to 1.7 million of new immigrants in 2020. Under the low scenario, the increase in net immigration will be much smaller, from 1.2 million to 1.3 million over the same time period.

For more information about this item, please contact Natalia Siniavskaia at 800-368-5242 x8441 or via email at nsiniavskaia@nahb.org.


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