If immigration doesn't cause any increase in housing supply, then it will tend to raise housing prices and make housing less affordable. But is immigration really not raising housing supply in Spain? What's the evidence?
Some things that make the question tricky to answer:
1. Short run versus long run: it takes time for home building to mobilize and complete projects. Sometimes it just takes little patience.
2. What's the counterfactual? What would housing supply look like without immigration?
There's a theoretically robust scenario in which immigration doesn't trigger any new housing supply, because there's an overhang of excess housing that makes prices depressed. Immigration might cause house prices to rise, yet not enough to make the equilibrium price exceed the cost to build new homes.
Empirically, I do not have enough information and honestly, is just my ambiguous perception, which is not ideal or, even, valid.
Most likely, the immigration have increased the supply, but in this case, the demand focus in the big cities (Madrid, Barcelona, Valencia). The government also have created benefits for decentralization to rural areas, but it seems it is not having the best results.
I also agree that the benefits of immigration are felt in long run, but in your case, what happens if the workforce does not necessarily go to construction work force? Even though this is likely to happen, it will be enough to sustain the supply growth.
I agree with the text and the housing market is not that easy to simplify in a macro-economic perspective. Taking in account that not every house market is the same everywhere, of course.
The model's prediction that immigration will improve housing affordability at the margin depends on the assumption that immigration will increase the construction industry workforce and lower its labor costs. This happens most directly if immigrants work in construction, which happens a lot in the United States. But the casual channel could also operate indirectly, if immigrants substitute for natives in other Industries, and free up native labor to work more in construction. That still depends on immigrants being fairly close substitutes for a native workers who have a hypropensity for working in construction if immigrants are from a different class-- highly educated and older, for example-- then the prediction of greater housing affordability might not apply.
The housing affordability prediction also depends on there being at least some land available for development of new housing and/or infill or observation of existing housing so that it can accommodate more people. That's certainly the case in the United States, and I'd be surprised if there's any developed country where it doesn't apply. But I don't know much about land use regulation in Europe.
I agree and also believe that the housing market in USA is similar, in some extend, to the developed countries and the majority of the european countries.
Thanks Alex! I love that he posts a guest post that's explicitly critical of him, albeit in a friendly way. Commenters: I'll watch this space and provide feedback from the author to defend/explain. So please articulate your questions/doubt/pushback!
Great perspective and thank you for the deep analysis and the figures provided.
However, what happens if the immigration does not grow the supply and low the prices? Or even if the imigrant growth exceeded the pace?
I know that the article is focus on the USA housing market, but for example Spain, had reached a population recorded and received hundreds of new persons in last months. This case is also particuly because the demand is focus in certain areas/big cities.
If immigration doesn't cause any increase in housing supply, then it will tend to raise housing prices and make housing less affordable. But is immigration really not raising housing supply in Spain? What's the evidence?
Some things that make the question tricky to answer:
1. Short run versus long run: it takes time for home building to mobilize and complete projects. Sometimes it just takes little patience.
2. What's the counterfactual? What would housing supply look like without immigration?
There's a theoretically robust scenario in which immigration doesn't trigger any new housing supply, because there's an overhang of excess housing that makes prices depressed. Immigration might cause house prices to rise, yet not enough to make the equilibrium price exceed the cost to build new homes.
Hi, Nathan! Thank you for your reply!
Empirically, I do not have enough information and honestly, is just my ambiguous perception, which is not ideal or, even, valid.
Most likely, the immigration have increased the supply, but in this case, the demand focus in the big cities (Madrid, Barcelona, Valencia). The government also have created benefits for decentralization to rural areas, but it seems it is not having the best results.
I also agree that the benefits of immigration are felt in long run, but in your case, what happens if the workforce does not necessarily go to construction work force? Even though this is likely to happen, it will be enough to sustain the supply growth.
I agree with the text and the housing market is not that easy to simplify in a macro-economic perspective. Taking in account that not every house market is the same everywhere, of course.
Once again, thank you for your opinion and work!
The model's prediction that immigration will improve housing affordability at the margin depends on the assumption that immigration will increase the construction industry workforce and lower its labor costs. This happens most directly if immigrants work in construction, which happens a lot in the United States. But the casual channel could also operate indirectly, if immigrants substitute for natives in other Industries, and free up native labor to work more in construction. That still depends on immigrants being fairly close substitutes for a native workers who have a hypropensity for working in construction if immigrants are from a different class-- highly educated and older, for example-- then the prediction of greater housing affordability might not apply.
The housing affordability prediction also depends on there being at least some land available for development of new housing and/or infill or observation of existing housing so that it can accommodate more people. That's certainly the case in the United States, and I'd be surprised if there's any developed country where it doesn't apply. But I don't know much about land use regulation in Europe.
Thank you for the insight and input, Nathan!
I agree and also believe that the housing market in USA is similar, in some extend, to the developed countries and the majority of the european countries.
Great readings and research!
Thanks Alex! I love that he posts a guest post that's explicitly critical of him, albeit in a friendly way. Commenters: I'll watch this space and provide feedback from the author to defend/explain. So please articulate your questions/doubt/pushback!
Hello!
Great perspective and thank you for the deep analysis and the figures provided.
However, what happens if the immigration does not grow the supply and low the prices? Or even if the imigrant growth exceeded the pace?
I know that the article is focus on the USA housing market, but for example Spain, had reached a population recorded and received hundreds of new persons in last months. This case is also particuly because the demand is focus in certain areas/big cities.