Could Immigration Reform End the Housing Boom?
With much of residential building being done by illegal immigrants (40% by one estimate, 80% in Texas), any crackdown on their employment will strain an already short-handed building labor market. This will subsequently increase the amount of time necessary to build a home by several months, which will substantially increase costs to the buyer. Sounds like a pretty feasible scenario to us, considering the increasing frequency with which business are getting raided for hiring illegal workers.
Frank Fuentes, president of the Hispanic Contractors Association, queried his 20 largest member firms about speaking with FORTUNE, and not one was willing.
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"They're scared to death of being raided," says Fuentes.
By FORTUNE's estimate, up to 40 percent of new-home construction in the U.S. is being done wholly or partly by undocumented immigrants. Fuentes suspects the percentage in his home state of Texas is closer to 80 percent.
According to a study by the Pew Hispanic Center, 36 percent of insulation workers, 29 percent of roofers, and 28 percent of drywall installers are "unauthorized workers."
"They're scared to death of being raided," says Fuentes.
By FORTUNE's estimate, up to 40 percent of new-home construction in the U.S. is being done wholly or partly by undocumented immigrants. Fuentes suspects the percentage in his home state of Texas is closer to 80 percent.
According to a study by the Pew Hispanic Center, 36 percent of insulation workers, 29 percent of roofers, and 28 percent of drywall installers are "unauthorized workers."
Big builders don't employ construction workers, legal or illegal. They hire subcontractors that in turn hire the workers who do the actual sawing and hammering.
"The entire home building business is outsourced," says A.G. Edwards analyst Greg Gieber. It's unclear whether this setup will protect builders should the feds start enforcing immigration laws more vigorously.
Big builders don't employ construction workers, legal or illegal. They hire subcontractors that in turn hire the workers who do the actual sawing and hammering.
"The entire home building business is outsourced," says A.G. Edwards analyst Greg Gieber. It's unclear whether this setup will protect builders should the feds start enforcing immigration laws more vigorously.
In May, Fischer Homes, a leading builder in Kentucky and Indiana, was raided by U.S. Immigration and Customs Enforcement (ICE), and four Fischer supervisors were charged with harboring illegal aliens.
Court papers filed by ICE accuse Fischer of using subcontractors "to provide a layer" between it and some 75 illegal workers. That layer, the feds contend, "does not relieve Fischer of the responsibility to ensure that their contractors are employing a legal work force."
A crackdown on undocumented workers would shrivel an already tight construction labor market. Lee Wetherington of Lee Wetherington Homes in Sarasota, Fla., estimates that 70 percent of the workers employed by his subcontractors are Hispanic immigrants.
"If for any reason we lose that work force, you're going to see the time required to build a house double or triple and the cost of new homes increase 30 to 40 percent," Wetherington says.
He insists that there just aren't enough native-born workers available to meet demand and points to Sarasota County's 2.3 percent unemployment rate.
His company built 300 homes last year. Without immigrant workers, "we'd have been lucky to build 75," he says.
Wetherington does not know how many of those workers are undocumented, but he suspects it's the majority. He recalls an incident last year when the arrival of workers' comp officials spooked laborers into thinking an immigration raid was underway.
"Everyone scattered," he says. "The entire site just cleared out."
