No, Immigrants Aren’t Responsible for the Housing Shortage. Here’s the Real Cause.

By Christopher J. Calton of The Independent Institute.

"Illegal immigrants are President Donald Trump’s favorite scapegoat for America’s problems. So, it is no surprise that he blames them for the housing shortage.

More surprising, perhaps, is the recent report from J.P. Morgan that offers a similar explanation.

“It is estimated that there are 11.2 million undocumented immigrants in the U.S., and that number may be higher,” the report states. “This could be ramping up housing demand more than figures suggest, resulting in a shortage of stock.”

This line of thinking is fundamentally flawed. The absurdity should be apparent when considering its logical corollary. If demand for housing causes shortages, then 11 million undocumented immigrants are a drop in the bucket compared to the more than 300 million Americans who are here legally and bidding up home prices. If only we could do something about those selfish citizens who recklessly want to buy or rent homes, housing prices would come down dramatically!

Where shortages already exist, spikes in demand can certainly make them more painful, but demand does not create shortages—at least not sustained ones. Presumably, migrants buy more than housing, but they do not create shortages in other goods because most industries are free to respond to increased demand.

Why can’t housing developers do the same? The answer is that supply constraints create shortages, and in the housing market, those constraints are imposed by local and state regulations.

The U.S. population grew from 38.5 million in 1870 to 76 million in 1900, with immigration accounting for more than 12 million new residents. Cities like New York were becoming considerably denser, but housing remained plentiful.

“A largely unregulated private real estate market drove urban expansion,” writes historian Richard White in his history of Gilded Age America. “The cities provided services property owners could use at their discretion and opened up public spaces at low cost for private developments, while at the same time placing few effective controls on the use of private property.”

The tenement apartments of the time got a bad rap, but perspective is important. Tenements were immensely affordable, yet progressive reformers convinced themselves that greater population density—fueled largely by immigrant “lodgers”—inflated rents.

“The landlord finds it easy to excuse a high rental by pointing out that the families will surely take lodgers and earn enough to pay it,” speculated one reformer in 1911. That same year, the U.S. Immigration Commission, in a special report titled “Immigrants in Cities,” found that the average monthly rent across seven major cities was only $10 (roughly $324 in 2025 dollars).

The housing movement that grew from opposition to tenements led to anti-density regulations. New York State fired the first shot with its Tenement House Act of 1901, which included open-space requirements and height limitations. Other cities followed suit. By World War I, reformers had expanded their movement through zoning laws, which became the primary tool for curbing cities’ population growth.

After the war, anti-density reformers were perplexed that builders had lost interest in producing new homes for the low-income rental market. In his 1938 book, “The Challenge of Housing,” New York’s former tenement-housing commissioner reflected bitterly that “New York and many other states ... set up standards sufficiently high to make it impossible to build houses, particularly multi-family dwellings, which could be rented profitably to the poor.”

Developers today are saddled with even more onerous land-use policies, often accompanied by stringent environmental and labor regulations that further delay or prevent development and compound costs. Zoning codes in much of the country even outright prohibit affordable housing such as apartments and mobile homes.

The simple truth is that we would have a severe housing shortage even if President Trump were to deport every undocumented immigrant tomorrow. But if cities and states deregulated their housing markets so developers could build more freely—as they could when immigration was proportionally much higher—housing would quickly become more abundant regardless of how many people crossed the border.

The longer we scapegoat immigrants for America’s self-imposed housing shortage, the longer it will take us to solve it."

More About Trump’s Sham “Reciprocal” Tariffs

By Colin Grabow, Scott Lincicome, and Kyle Handley of Cato. Excerpt:

"For all of President Donald Trump’s talk about reciprocity, it turns out that he just wanted higher tariffs. After weeks of threatening “reciprocal” tariffs to match the higher tariffs and trade barriers of US trading partners, Trump announced yesterday that the United States was slapping a 10 percent tariff on everyone. Dozens more countries face still higher tariffs—up to 50 percent—for alleged trade transgressions.

The result appears to be the highest US tariffs since 1909, already ten times the size of those in place before Trump took office and at an average rate exceeding even that imposed by the infamous Smoot-Hawley Act, which is widely blamed for prolonging the Great Depression. Early analysis suggests the tariff hike amounts to an annual tax increase of over $100 billion per year, with income- and growth-sapping effects sure to be felt by virtually all Americans. And, of course, it was all imposed with mere days’ notice and without any congressional input or public comment.

So how, pray tell, did the Trump administration arrive at massive tariffs that it alleges offset foreign trade barriers of an equivalent amount?

You have to read it to believe it.

An Unserious (at Best) Approach to “Reciprocity”

As our colleagues Jeremy Horpedahl and Phil Magness detailed, the administration—by its own admission—did not conduct a careful and thorough analysis of foreign tariff and nontariff barriers that necessitate such a huge tax hike. Instead, the US Trade Representative’s office admits it simply assumed that US trade deficits—overall and with individual trading partners—reflect tariff and non-tariff factors that “prevent trade from balancing” and then calculated a tariff rate to bring bilateral trade into equilibrium.

Yet no serious international economist would make such an assumption. As Cato scholars and many others have long documented, trade balances are in general driven not by trade policies but by savings and investment (which are themselves driven by policy and non-policy factors). And bilateral trade balances are even less relevant because of trade with third countries, as well as global supply chains, embedded services, and international capital flows. To bluntly use a bilateral trade balance as a proxy for, in one White House official’s words, “trade cheating” makes no sense.

Believe it or not, it gets worse. In particular, the White House’s tariff rate calculation is barely more sophisticated than dividing the bilateral trade deficit between the United States and each trading partner by the quantity of goods imported into the United States, and then (completely at random) further dividing it by 2. Presto, there’s your “reciprocal” tariff rate.

White House officials counter that their formula is more complex than this, but—as Horpedahl and Magness note—this is far from exculpatory. In particular, the two additional variables the “official” calculation uses—tariff pass-through to domestic prices and the elasticity of demand for imports—coincidentally offset each other (with values of 0.25 and 4, respectively). They’re also unsupported in the economics literature: Not only is the elasticity value contradicted by even the very paper the USTR cites, but no serious economist would apply one number for all countries and all products because there is no one elasticity to rule them all. If this formula were applied only to, say, Vietnam, it might plausibly be a shortcut to calculating a tariff that zeroes out the bilateral trade balance, but not when applied to everyone at the same time.

It’s all economic witchcraft. Basing the tariff numbers on a ritualistic reading of entrails would have been as rigorous as the administration’s methodology.

And, as the following examples show, the results are tragicomic:

• Brazil, traditionally considered to have relatively high trade barriers (as even the White House admits) was hit with the same 10 percent tariff as free trade exemplar—and US FTA partner!—Singapore. Why? Because the United States currently runs a goods trade surplus with Brazil.
• The islands of Saint Pierre and Miquelon are facing a whopping 50 percent tariff for the trade crime of exporting $3.4 million worth of goods while importing a mere $100,000 of US products.
• Mauritius, which features a trade-weighted average tariff of just 1.3 percent, faces “reciprocal” tariffs of 40 percent.
• The uninhabited Australian territory of Heard Island and McDonald Islands faces 10 percent tariffs, while Norfolk Island (population: 2,188), another Australian territory, will be hit with 29 percent duties.

You cannot make this up.

Unfortunately, there are even more problems with the White House’s approach. Most notably, it excludes any cuts to US tariffs or trade barriers, which can in many cases be quite high, to match those of countries with more open economies. “Reciprocity” apparently was a mere marketing gimmick for the higher tariffs that Trump has long desired. Heads they win; tails you lose.

As disappointing as this outcome is, we can’t say we’re surprised. As we have pointed out for weeks now, exhaustively analyzing foreign trade barriers and producing matching US tariff rates would take many months, if not longer. And the president’s longstanding and misguided affection for tariffs (disdain for trade deficits) isn’t exactly a secret. That the White House would quickly produce intellectually honest—and in some cases net liberalizing—reciprocal tariff numbers without resorting to guesstimates and risible shortcuts in their calculations was never plausible."

How commercial variolators fought smallpox in the 18th century

See My Conversation with the excellent Sheilagh Ogilvie from Marginal Revolution. Excerpt:

"If you were a teenager in an English village in the 18th century and you were deciding, “I’m going to move to London and get a job,” you and your friendship group from the village would all go into the nearest town and pay a commercial variolator. You’d all get smallpox together. You’d go back to your village. You’d suffer through this mild case of smallpox, and then you would be immunized for life, assuming that you hadn’t died. You would go off to London and seek your fortune. It was very much a normal teenage thing to do.

There was this incredible franchising set up in England. It was like a McDonald’s, but to get variolated. There were these entrepreneurs who advertised themselves as having lower-risk ways of getting immunized and cheaper ways of getting immunized. There was this famous family of the Suttons that started a franchise in 18th-century England in the 1750s. Then they spread into the continent of Europe and actually into North America."

The Second Law of Demand and Supply in Action (on why price controls cause problems)

By Jon Murphy.

"It’s no surprise egg prices are soaring.  In October 2024, UMASS – Amherst economist Isabella Weber argued that price controls are needed to keep prices under control and, further, that the controls would not have the negative effects we usually predict, such as shortages, deadweight loss, etc.  I responded to her claims here.  One of the points I raised was:

Furthermore, since the price being kept artificially low disincentivizes the supply curve from becoming elastic and/or growing, the costs of price ceilings persist longer than they would otherwise.

Four months later, we see this in action.  The high prices of eggs are causing people to consider turning to backyard chicken coops or even renting chickens.  This is an example of the Second Law of Demand: “Elasticities of demand with respect to price are greater the longer the time after a price change” (Universal Economics by Armen Alchian and William Allen, p 116).  In other words, the longer prices remain relatively high, the more people will search out or develop substitutes, making the demand curve more elastic.  The same holds true for supply: the longer prices remain relatively high, the more creative people will be to bring supply to the market.  When eggs were $0.99 a dozen, it made little sense to have a backyard chicken coop, which has start up costs of thousands of dollars.  But, with egg prices pushing the double-digits (a dozen large eggs are selling for $9 at my local store), now the relative price of backyard coops has fallen and people are turning to that alternative.  The demand for eggs is becoming more elastic.  Same with supply, as we see people with coops selling or giving eggs to their neighbors.

With price controls in place, this process would be much harder.  The market is moving toward a solution.  Price controls would have slowed this process.  Rather than ending shortages and controlling inflation, Weber’s proposal would have just turned the visible costs invisible.  

Update: The price of eggs has fallen since I originally wrote this piece.  The price of a dozen eggs at my local store is now (as of 3 April) $5.79.  However, I will not change the original post because the drop supports the point I am making here."

Erica York summarizes research on tariffs

From her Twitter account.

"We can also look at the studies the White House chose not to cite:

An April 2019 University of Chicago study conducted by Aaron Flaaen, Ali Hortacsu, and Felix Tintelnot found that after the Trump administration imposed tariffs on washing machines, washer prices increased by $86 per unit and dryer prices increased by $92 per unit, due to package deals, ultimately resulting in an aggregate increase in consumer costs of over $1.5 billion.

An October 2019 study by Alberto Cavallo and coauthors found tariffs on imports from China were almost fully passed through to US import prices but only partially to retail consumers, implying some businesses absorbed the higher tariffs, reducing retail margins, instead of passing them on to retail consumers.

In December 2019 (study updated in August 2024), Federal Reserve economists Aaron Flaaen and Justin Pierce found a net decrease in manufacturing employment due to the tariffs, suggesting that the benefit of increased production in protected industries was outweighed by the consequences of rising input costs and retaliatory tariffs.

A February 2020 paper from economists Kyle Handley, Fariha Kamal, and Ryan Monarch estimated the 2018–2019 import tariffs were equivalent to a 2 percent tariff on all US exports.

A December 2021 review of the data and methods used to estimate the trade war effects through 2021, by Pablo Fajgelbaum and Amit Khandelwal, concluded that “US consumers of imported goods have borne the brunt of the tariffs through higher prices, and that the trade war has lowered aggregate real income in both the US and China, although not by large magnitudes relative to GDP.”

A January 2022 study from the US Department of Agriculture estimated the direct export losses from the retaliatory tariffs totaled $27 billion from 2018 through the end of 2019.

A January 2024 study by David Autor and others concludes that the 2018–2019 tariffs failed to provide economic help to the heartland: import tariffs had “neither a sizable nor significant effect on US employment in regions with newly‐​protected sectors” and foreign retaliation “by contrast had clear negative employment impacts, particularly in agriculture.”

A NY Fed January 2025 study "We find that a fall in a firm’s stock prices on tariff-announcement days is associated with a significant decline in firm performance between 2019 and 2021. In particular, a one-standard-deviation fall in a firm’s stock prices (a 0.56 percent fall in market value) is associated with a fall of 12.9 percent in profits, 3.9 percent in employment, 6.7 percent in sales, and 2.2 percent in productivity.""

The 3 Myths Supporting NIH Funding

By Zachary R. Caverley. He is a Physician Assistant practicing Cardiology in Oregon. From Reason. Excerpt:

"Myth No. 1: The U.S. Cannot Be an Innovative Research Leader Without Strong Public Funding

Shortly after the funding cuts were announced, a member of the University of California, Santa Cruz's informatics team wrote, "American research institutions have historically been at the forefront of medical and technological advancements. This proposal is a fast track to reversing that. Other countries that actually invest in research will surge ahead while U.S. institutions struggle to keep the lights on."  

These arguments make sense only if the following assumptions are accurate: that the amount of NIH spending is important for scientific achievement, and that publicly funded academic research is the primary factor needed for innovation. These assumptions don't stand up under scrutiny. 

Like many things in U.S. research, the NIH owes its growth to the spoils of war. The Ransdell Act of 1930 that established NIH research fellowships was the product of World War I chemists looking for funding to apply their knowledge to medical issues. The subsequent Public Health Service Act of 1944 arose from proponents such as Vannevar Bush, who ran the Office of Scientific Research and Development during World War II, wanting to ensure the massive federal science endowments that took place during the war would continue through peacetime. From these efforts, despite U.S. science previously being mostly laissez faire, the NIH budget would expand from $8 million in 1947 to more than $1 billion in 1966. If federal funding is a prerequisite for scientific innovation, we would expect a severe lack of the latter in medicine prior to the expanded federal role.

But in the early 20th century, philanthropists were already funding the type of research the NIH later did, with impressive yields. Among them was the Rockefeller Foundation, whose research led to the discovery of a vaccine for yellow fever, advanced the understanding of cell biology, and assisted the efforts to mass produce penicillin. For this latter effort, U.S. pharmaceutical firms proved to be the key component to produce enough penicillin to sustain the war efforts and help save the lives of wounded soldiers.     

U.S. biomedical science in the era before the NIH was spreading federal money was not hurting for private support, and while some insist that increased government spending only strengthened a good foundation, the public sector's role is often overstated regarding some canonical research achievements. The Human Genome Project is a good example. The NIH correctly asserts this groundbreaking international collaboration "changed the face of the scientific workforce," but it was only made possible by the automatic gene sequencer developed by Leroy Hood, who noted the invention received "some of the worst scores the NIH had ever given."

It was only through the generosity of Sol Price—the founder of warehouse superstores—that the technology came to fruition and the human genome was finally sequenced. Similar stories of private generosity in place of government grants can be found for stem cell research.

As for the importance of publicly supported academics, consider the story of mRNA vaccine development. The NIH timeline implies that smart government investment into years of HIV research was the key to this lifesaving technology, but the chief innovator of the eventual product, Katalin Karikó, was roadblocked for years in academia and even demoted for her lack of grant acquisition. She would later leave the university setting and work for BioNTech in the private sector to create the Pfizer vaccine. Her story is conspicuously absent from the NIH timeline of events.

Karikó's experience suggests that public funding for academic science is not necessarily the crucial factor for scientific advancement and innovation. In practice, the private sector drives new technologies. Drug development, for instance, would be impossible without the power of the pharmaceutical industry to fund new chemical entities. Authors of a 2016 survey on some of the most transformational drug therapies that appeared in the journal Therapeutic Innovation & Regulatory Science wrote that "without private investment in the applied sciences there would be no return on public investment in basic science." 

A subsequent analysis in 2022 in the same journal found that only privately funded projects actually hit the market as Food and Drug Administration–approved therapies and that public funding had a possible negative effect on achieving approval. Note the cautious interpretation by the authors: "Our study results underscore that the development of basic discoveries requires substantial additional investments, partnerships, and the shouldering of financial risk by the private sector if therapies are to materialize as FDA-approved medicine. Our finding of a potentially negative relationship between public funding and the likelihood that a therapy receives FDA approval requires additional study" (emphasis added).

If it cannot deliver therapies, federally funded science should at least be producing noteworthy and reproducible science. A writer for Psychology Today noted this month that the federal government is the largest funder of psychological research. But should we consider that a good thing? Psychology is a research field where as low as one-third of the findings can be replicated for a given set of publications, which calls into question the trustworthiness of that nonreproducible work. Even outside psychology, it is not even clear that federally funded research is producing our most noteworthy scientists: A large majority of researchers authoring the most highly cited papers in the biomedical research field operate without NIH funding."

Manufacturing employment has been falling since the early 1950s and NAFTA did not affect the trend

 From Marian Tupy on Twitter.