May 31 2006 9:08AM | Permalink | Email this | Comments (0) |
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New immigration rules may come from Washington soon but it still unclear if the changes on balance will prove to be good or bad for construction. You won’t know the impact on your business until at least next winter when you can observe the new rules in action for at least six months and see which of the changes in the 600 plus page legislation are being enforced, which are being ignored and which have been bent by court rulings.

The most immediate impact will on the supply of construction labor. Initially, this will almost certainty be negative for contractors heavily reliant on illegal labor. But, long-term, the significant impact will be on the change in the US population count and growth trend. Watch the border. If the flow of illegal crossings, net of deportations and voluntary exits, slows little or increases, would be illegal immigrants have concluded that the new rules are more smoke than fire and immigrant-driven population growth will boost space demand for a long time.

The new rules will include a way for many long term illegal immigrants to get work permits so they can come out of the shadows and spend money on housing, business property and other items without fear of losing much of their investment should they be deported. This group is at least several hundred thousand households, perhaps much larger. Money taken out from under the mattress or brought back from Mexico could provide a big boost to construction demand spread over several years. We had a preview of this in 2004-05 when mortgage brokers created special mortgages for illegal immigrants that did not require a social security number or income verification through tax returns or pay stubs.

But the flip side of the coin is that the new rules will also force many recent illegals to leave the country, either permanently or until they qualify for a work permit, or drive them further into the shadows where they would likely spend less on housing and cautiously remit more of their income home.

Which group is bigger? Is it those emboldened to spend like legal residents or those forced to leave or hunker down out of sight and leave no paperwork trail? Both sides in the immigration debate are using population estimates that suggest that the two groups are the same size. But what we do not know is what share of the long-term immigrants have already accumulated enough fake paperwork to feel comfortable spending like legal residents. We also do not know what share of the more recent immigrants can BS their way to get a work permit, what share will elect to leave the US or what share will be deported.