Economy & Budget

Illegal Alien Labor Helped Burst The Housing Bubble

Optimism about housing values also led to a boom in home construction. Eventually, the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell, and this created a problem.” — President George W. Bush, explaining the origins if the housing meltdown in his emergency address of September 24, 2008

The now deflated Housing Bubble had many causes.  These include promiscuous lending practices, low interest rates, federal policy aimed at turning human credit hazards into homeowners, the baby boomers entering their prime earning years, and HGTV.

The bursting of the bubble also had multiple causes, many of which have been well covered in the media.  But in my opinion, one contributing factor has not been covered at all — because it is politically unpalatable to most reporters and commentators.  The huge influx of cheap illegal alien labor during the Bubble years helped fuel a massive nationwide home building spree that resulted in a price-killing oversupply of houses.

In many areas of the country, residential construction and remodeling was transformed during the last decade to be a business based on the easy and open availability of cut-rate illegal labor.  New homes have traditionally sold at a steep premium compared to existing homes, in part because of the high cost of trade labor, both skilled and unskilled.  With the willful breakdown in immigration and labor laws that marked the Clinton and, more especially, the Bush administrations, this changed.

Suddenly, “McMansions” appeared in huge numbers outside every major city in the United States.  A more appropriate term might have been “MexMansions,” because they were made possible by the cheap migrant labor that gathered on every construction site, street corner and Home Depot parking lot in the country.  

To be fair, at one point the cheap increase in home building capacity probably acted as a temporary safety valve, keeping prices from peaking earlier.  This same mechanism, however, allowed the escalation in housing prices to continue longer and develop into more of a classic psychology-driven mania: years and years of steady home price increases led people to believe that there would be years more of steady increases.

Eventually, however, lax credit funneled into a nearly unlimited work force (measured in hundreds of thousands, if not millions, of low-wage workers), resulted in the obvious outcome: too many houses to sell.  Prices peaked, the bubble burst, and we arrived at our current predicament: home inventories that could take over a year to sell at current rates.

And long after the peak, the housing juggernaut kept on borrowing and building until it bankrupted itself though its own relentless “efficiency.”  The building binge has now become a housing hangover, and, like all hangovers, it is worse when fueled by overindulgence in cheap stuff.

For years, the open borders lobby touted illegal labor as a panacea for high prices.  Unfortunately for homeowners, they were right. 

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