Another Unintended Consequence of AZ Immigration Law: More Foreclosures and Vacant Homes

With only six weeks until Arizona’s immigration enforcement law goes into effect, area housing analysts are already expecting the worst. According to the Arizona Republic, housing experts anticipate that SB 1070 will not only drive illegal immigrants out of the state, but legal residents and potential new homebuyers with them—“departures from a state where growth is the economic foundation.” The resulting exodus will likely spur more foreclosures and create more vacant homes and apartments, which as real-estate analysts point out, will scare off potential homebuyers who fear lower home values. With a budget deficit of $4.5 billion and an economy struggling to get back on its feet, a declining housing market is the last thing Arizonans need.

The Pew Hispanic estimates Arizona’s undocumented population at around 500,000 people—many of whom own homes and pay taxes. But according to Phoenix housing analyst, Mike Orr, many of these homeowning immigrants are expected to leave as a result of the new law:

Estimates are that there are several hundred thousand undocumented aliens residing in Arizona. If the law has the intended effect and these people do leave, then both population and demand for housing will probably decline.

Likewise, many of Arizona’s documented residents are also expected to leave the state thanks to SB 1070. According to the U.S. Census, Latinos make up roughly one-third of all Arizonans (29.7%)—many of whom feel targeted by the new law. According to Jay Butler, director of realty studies at Arizona State University:

The immigration law creates a difficult situation for both legal and illegal residents. Some illegal residents may have planned on leaving the Valley anyway because they can’t find jobs. But I have talked to young Hispanics who are residents and so are their parents and grandparents. And those Hispanics plan on moving to other states because they don’t want to be perceived as second-class citizens.

Real-estate experts are using Arizona’s 2007 employer-sanction law—which made it illegal to knowingly hire an undocumented immigrants in the state—as a point of comparison. According to a report from the Department of Homeland Security, “more than 100,000 illegal immigrants left Arizona in 2008, more than any other state. Metro Phoenix foreclosures and apartment vacancies both jumped that year.”

Unfortunately, a declining housing market is just one of the many negative fiscal impacts of SB 1070. While the cost of implementation alone could reach the hundreds of millions of dollars, the legal fees resulting from lawsuits could also soar into the millions—not to mention the economic boycotts and loss in economic activity (to the tune of $26.4 billion) if all undocumented immigrants were removed from the state.

“The immigration law just piles onto our problems,” said Brett Barry, a Phoenix real-estate agent with HomeSmart. “We are already struggling to find the jobs and keep the schools open to entice new residents.”

As other states consider similar legislation, legislators should also consider the economic consequences. Clearly the problems within our broken immigration system should not be overlooked, but nor should the critical roles immigrants—both documented and undocumented—play in the economic stability of our nation as workers, entrepreneurs, consumers and homeowners.