Immigration, long a lightning rod in U.S. political debate, is more than a border story for the housing economy. It’s a workforce story. It’s a household formation story.

And, increasingly, it’s a test of strategic foresight for developers, homebuilders, and housing investors trying to plan beyond the next six quarters.

We’ve seen that so much job growth over the last two to three years has been fueled by an increase in foreign-born employment,” says Eric Finnigan, Vice President of Demographics Research at John Burns Research & Consulting (JBREC). “If that inflow shuts down, we’re going to see slower job growth — because fewer people are available to hire.”

While the national immigration conversation centers on enforcement and deportation, the housing industry sits at a precarious crossroad: Will immigrant workers remain on job sites? Will immigrant households continue to drive rental absorption and eventual homeownership? And how much of that activity can the industry afford to lose?

Labor: Fears vs. Reality—For Now

According to JBREC’s recent builder survey, only about 10% of respondents in February 2025 reported any direct impact from immigration enforcement on labor availability. That number ticked slightly down in March.

There was some early fear,” says Finnigan. “A few crews stayed home, concerned about worksite raids. But in practice, there hasn’t been a significant ramp-up in deportations yet. A lot of it may be posturing, or still in planning.”

Still, that calm could shift quickly. Roughly 30% of residential construction labor is foreign-born, making it a critical pressure point in any stepped-up deportation campaign. And with fewer new immigrants arriving — due to slowed visa processing and near-total border slowdowns — the replenishment of that workforce is already under strain.

600,000 Rentals That Wouldn't Exist Without Immigration

On the demand side, Finnigan says the immigration surge of the past two years has added an estimated 600,000 occupied rental units above normal household formation projections.

These aren’t units in institutional-grade buildings,” he says. “The increase is concentrated in smaller rental properties—two-to-nine or ten-to-forty-nine unit buildings. That’s where the immigration impact is most visible.”

The kicker? If that demand weren’t there, vacancy rates would spike in smaller multifamily segments, and rent growth would flatten further in key metros. Instead, immigration keeps some balance in the rental sector, even as the single-family resale market remains seized.

FHA Rule Change Could Hit Immigrant Buyers

A March 2025 Federal Housing Administration (FHA) policy change added fresh uncertainty. FHA loans will no longer be available to non-permanent residents, cutting off an essential path to homeownership for many working immigrant families.

It’s going to affect immigrants who’ve been here for a while,” says Finnigan. “Most immigrant householders rent when they first arrive. Homeownership rises over time. This change targets that next stage—just when some families want to buy.”

Regions like the Southwest, parts of Florida, and the Carolinas—where immigrant communities represent a rising share of household growth—could feel the policy’s impact first.

Border Crossings Fall, Legal Statuses Shift

Finnigan’s data shows a massive drop in border crossings, from a high of 250,000 apprehensions per month in 2023 to just 8,000 in February 2025. Migration through Panama’s Darien Gap — a key route for many South and Central American migrants — has also shrunk to a trickle. Combined with Mexico’s stepped-up enforcement, the pipeline of new immigrants is narrowing dramatically.

Meanwhile, the legal status of existing immigrants is also under review. Temporary Protected Status (TPS) for Ukrainians, Venezuelans, and others is being reclassified, which could jeopardize otherwise law-abiding residents who were once authorized to live and work in the U.S.

People who were here legally might now be considered deportable,” Finnigan says. “There’s a lot happening there, and builders should be paying attention.”

Slowing Domestic Migration Adds to the Challenge

While international immigration has recently kept net population growth positive in some major metros, domestic migration trends are moving the opposite direction.

Take Atlanta, for example,” says Finnigan. “It’s still drawing international migrants, but domestic net migration has turned negative. People aren’t leaving the Northeast or Midwest as quickly as they were.”

Part of the issue is affordability. More residents are trading central locations for outer-ring suburbs or neighboring metros—still within commuting range but outside the Census boundaries of core cities. In Florida, that means moves from Miami to West Palm Beach, or from Tampa to Ocala.

The Bigger Problem: Fewer Future Households

The more existential challenge? Slowing natural population growth.

The number of babies born in the U.S. has fallen to about 3.6 million a year,” Finnigan says. “That’s down from 4.3 million at the peak in 2007. We’re now seeing fewer women become mothers, delayed childbirth, and smaller family sizes.”

This triple trend — lower birth rates, later births, and fewer children per family —means that future household growth is slowing and demand for larger homes with multiple bedrooms may also decline.

In his presentation to home design professionals, Finnigan states plainly:

The under-18 population has already peaked. By 2035, we’ll have 3 million fewer kids in the U.S. than we do today.”

Planning for Growth Without a Tailwind

Developers and strategic investors, accustomed to using demographic tailwinds as their long-term growth thesis, are now asking a new set of questions.

When we dropped our long-term household growth forecasts earlier this year, a lot of clients wanted to know: ‘Are these numbers real?’” says Finnigan. “We’re seeing more people thinking seriously about their 5- to 10-year plans. The idea that we can no longer count on natural demand growth to lift all boats—that’s sinking in.”

Some homebuilders are responding by going asset-light, controlling land through options rather than ownership. But for land developers and masterplan investors, whose capital is tied to 10- and 20-year returns, the strategic challenge is more daunting.

What Builders Can Do Now

For now, Finnigan recommends homebuilders and developers:

• Monitor policy changes closely, especially around FHA lending and immigration status categories.
• Model long-term absorption using updated, slower household formation forecasts.
• Think about housing typologies that work for smaller families, shared households, and aging immigrants.
• Consider long-distance commuters and the value of outer-ring and exurban communities where affordability still draws demand.

Immigration Isn’t a Side Issue — It’s the Ballgame

With legal immigration in flux, natural growth slowing, and affordability frozen, homebuilding’s most significant risks may lie in assumptions about tomorrow’s workers and households. The question for strategic operators and investors is no longer whether immigration matters but how well they’re adapting to what happens next.