After Georgia’s Strict 2011 Immigration Law, New Home Premiums Surged
- The new-construction premium in Georgia jumped sharply in 2012 after the state enacted strict illegal immigration laws, while remaining flat elsewhere in the country.
The new-home premium in Georgia – the additional cost placed on a newly constructed home versus an existing home – surged after the state passed one of the nation’s strictest immigration laws.
In May 2011, Georgia enacted HB 87 in an effort to crack down on illegal immigration and unauthorized immigrants statewide. Included in the legislation were penalties of up to 15 years in prison and fines of up to $250,000 for workers convicted of using fake identification to get a job. The precise effects of the law itself have been widely debated, but an analysis of Zillow home value data both before and after the law was enacted appear to show the law clearly made newly constructed local homes more expensive relative to existing homes.
New homes have always been pricier than existing homes, both in Georgia and the U.S. as a whole. But from 2011 to 2012, the new-home premium jumped sharply in Georgia while remaining flat in the rest of the country. In 2010, the year before HB 87 was enacted, the typical new home in Georgia was 33.9 percent – about $52,200 – more expensive than the typical existing home in its ZIP code. One year later, the premium had increased to 52.2 percent – about $78,300 – and has largely held steady since.[1] Nationwide, the premium rose more modestly – from 30.3 percent to 35.7 percent – over the same period. Moreover, the increase in the new construction premium nationwide occurred between 2010 and 2011, whereas the increase in the premium in Georgia occurred between 2011 and 2012.
To put the rise in more context: Prior to the enactment of HB 87, the new construction premium in Georgia was 18.3 percentage points below the new construction premium in Connecticut (52.4 percent premium for new construction in 2010), a state with much stricter local laws on land use and development than Georgia’s. After the enactment of HB 87, the new construction premium in Georgia was very close to the new construction premium in Connecticut (52.4 percent versus 53.4 percent respectively).
The full effects of the law are debated. Data from the Pew Hispanic Center show that the unauthorized immigrant population in Georgia fell meaningfully after 2011, but that unauthorized immigrants remained a significant portion of the state’s construction labor force through 2014 (the most recent data available).
The residential construction industry has long had a complicated relationship with immigrants and immigrant labor, particularly unauthorized immigrants. Some argue that using immigrant workers on construction sites helps keep labor costs down – and, by extension, helps keep the final price of new homes in check, too. Others say lower-priced immigrant labor takes opportunities away from native workers. More than two-thirds of experts recently surveyed by Zillow said construction labor costs nationwide would rise if undocumented immigration on the whole slows down, though opportunities for native workers would likely increase as well.
Of course, the spike in the new-home premium in Georgia does not capture the full effects of HB 87 on the market for new homes. Builders can and do adapt to higher costs in various ways, including by building fewer homes or focusing their efforts in different, less-expensive areas. But the data do suggest that Georgia’s HB 87 contributed to higher new construction prices in the state.
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[1] Since new homes tend to be built in different areas than existing homes, we control for these within-state geographic differences by comparing the value of newly built homes in a given ZIP code to the value of existing homes in the same ZIP code.