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Medium-Run Impacts of Immigration on the Housing Market (Denmark Case-Study)

#housing#immigration#prices

A paper was published recently by the Rockwool Foundation Berlin, where researchers from Aarhus University found surprisingly large medium-term impacts on housing prices due to immigration. I'm already seeing some anti-immigration voices referencing the paper, and I'm sure more will follow. Though the authors literally blame housing supply and call for more economic policies to address the inelasticity of the housing market, I imagine that will get completely lost in the existing narrative around immigration in Europe.

Here's the breakdown I find relevant:

  1. When the number of immigrants in a city increases by 1% over five years, rent goes up by about 6% and home prices go up by about 11%.

This is much larger than I think most people might have assumed, especially since Denmark did a relatively good job of distributing its migrant population over many municipalities.

  1. Cities don't build enough new housing to meet the increased demand

When more people move to an area, you'd expect builders to construct more homes and apartments. But this study found that doesn't really happen, at least not fast enough to keep prices stable.

  1. Immigration affects housing prices MORE than it affects jobs and wages

Previous research has shown that immigration doesn't dramatically change wages or job availability for local workers. The authors claim here that immigration has a much bigger impact on housing costs -- by an order of magnitude.

  1. Local residents move away from their immediate neighborhoods, but not out of the city

At the small neighborhood level, when immigrants move in, some local Danish residents moved to different neighborhoods (usually staying within the same city). However, at the city level overall, locals don't leave, they just re-locate.

  1. Immigrants initially choose cheaper neighborhoods

New immigrants tend to settle in more affordable areas first. This means the most dramatic price increases happen in neighborhoods that were previously less expensive.