This extends a comment I made here
At the height of the US housing boom, there was a strong (very strong 0.8) correlation between housing affordability (measured by the ratio of median household income to median house price) and the proportion of the residents in metropolitan areas who were foreign born. My take on that is that the foreign born cover the pool of non-citizen residents. Cities with lots of non-citizen residents mean that entrants to the housing market are disproportionately cut out of the political process, so the normal tendency of regulation to protect incumbents (in this case, owners of existing housing land) will be greatly increased.
Add to the fact that coastal cities tend to have strong positional goods (harbour views, hill top views etc) and the tendency to restrictive land use controls is increased on top of the aforementioned increased tendency to incumbent-protecting regulation. Hence the Zoned Zone versus Flatland, in Krugman's useful and evocative terms.
So, I think there is a connection between immigration and housing bubbles, but not quite what one would think. (There was, for example, no correlation between population growth and housing affordability.) So, to say, for example, more immigration drives up house prices regardless of what type of home they live in is only true if supply is constrained from responding to demand. Texas has high population growth and no significant bubble in housing prices.
While Australia is good at dealing with immigrants (as a share of population we have far more than the US, 20+% to 10%) but not when it comes to housing prices, where we have adopted the British/Californian control model not the German/Texas let-supply-respond-to-demand model. We are Zoned Zone, not Flatland.
Which also points to how much responses to migration depend on policy settings. If institutions are flexible so that people are not blocked from responding in mutually beneficial ways to the opportunities created by migration (opportunities the migrants are themselves seeking) then there will be far less problems than if official discretions and other actors act to block mutually beneficial responses and so increase difficulties. Whether that is by restrictive land use regulation blocking housing supply from responding to increased demand, restrictive labour regulation blocking the employment of marginal workers, blocking investment in appropriate transport or water infrastructure or whatever.
For example, the more flexible (which is to say, more open to mutually beneficial transactions) US labour markets are clearly much better at absorbing migrants than the more restrictive European labour markets (with France being the stand-out illustrative problem-case). The Nordic model, with its highly centralised and pervasive welfare state, is threatened by migration in a way the more liberal policy regimes of the Antipodes and North America are not.
Migration also, of course, generates issues about feeling not-in-control of the direction of one’s society: something that will be more intense the more one has to deal with the downsides of migration and the less one is connected into networks of influence. Thus, the resident urban working class has to deal with crime, congestion, labour competition problems but, unless politicians are willing to respond to voter pressures, have no effective way of expressing dissatisfaction. This is why illegal immigration is particularly problematic since, by being illegal, it is outside any control mechanism the general citizenry have. (Boat arrivals, as with "asylum seekers" in Australia become very visible, so very politically salient, exemplars of being denied a say.)
Intelligent responsiveness to popular concerns (not shouting at folk about how “racist” they are) and institutional arrangements which maximise the possibility of mutually beneficial transactions is the way forward on migration.
The Liberals’ Version of Book Burning -
14 minutes ago