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The Effects of Immigration on Local Housing Markets

Author

Listed:
  • Bill Cochrane

    () (University of Waikato)

  • Jacques Poot

    () (Vrije Universiteit Amsterdam)

Abstract

This paper provides a survey of the international evidence regarding the impact of immigration on local housing markets. A theoretical framework highlights the complexity of the housing market and the importance of distinguishing between the ownership and use of the stock of dwellings vis-à-vis the residential real estate market. Evidence from eight countries (Canada, France, Italy, New Zealand, Spain, Switzerland, United Kingdom and United States) and from meta-analysis shows that immigration will lead to higher house prices and rents, and lower housing affordability. On average, a one percent increase in immigration in a city may be expected to raise rents by one-half to one percent and the effect on prices is about double that. However, there is a large variance around this average which is related inter alia to the time frame and spatial scale of the analysis, as well as to local economic conditions. Additionally, the housing impact of immigration will depend on the demographic and economic composition of the immigrant flow, on macroeconomic conditions and expectations, on the institutional factors that influence the price elasticity of the supply of new dwellings, and on how the native born react to immigration. The tendency of the native born to move out of city wards where migrants settle can lead to relative house price declines in these areas. Overall, immigration has been only a minor contributor to the sharply rising house prices in many fast-growing agglomerations in recent decades.

Suggested Citation

  • Bill Cochrane & Jacques Poot, 2019. "The Effects of Immigration on Local Housing Markets," Working Papers in Economics 19/07, University of Waikato.
  • Handle: RePEc:wai:econwp:19/07
    as

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    File URL: ftp://wms-webappsprod.mngt.waikato.ac.nz/RePEc/wai/econwp/1907.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    immigration; housing; real estate; homeownership;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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