Housing Glut? Open the Borders

One of the key problems that is keeping the economy from rebounding (over and above the many blunders of the Obama administration) is that the housing market has a surplus that can't clear. The surplus keeps prices down, even driving them lower, and the actions of the government to try and keep risky homeowners in houses they can't afford -- forcing loan restructuring on lenders, giving judges the capability to wipe out "excess" debt when a loan is under water, putting a moratorium on foreclosures -- just prolongs the agony. If the government "buys" up the bad loans and/or the foreclosed properties at very low prices ( the thinking goes "they are using taxpayer money, so they should get the best deal, right?") then all that does is depress the market even more.

What is one surefire way to clear the market surplus of housing without depressing the market any further? Let immigrants buy them in exchange for permanent resident status, say Richard LeFrak and Gary Shilling in the Wall St. Journal.

A better idea [than having the government buy homes] is to offer permanent residence status to the many foreigners who are clamoring to get into the U.S. -- if they buy houses of minimal values (not shacks). ... Their temporary resident status granted upon purchase would become permanent after, perhaps, five years, if they still owned the houses and maintained clean records. The mere announcement of this program might well stop the ongoing collapse in house prices, especially in cities such as Las Vegas, Miami, Phoenix and San Francisco, where prices are down 40% -- but where many foreigners like to live. {bold added}

Any mention of allowing more immigration tends to incite protectionist fears, especially in traditional conservative camps, and even more so in a recession. One of many unfortunate aspects of the mainstream conservative mantra is that it views immigration as a leech on the welfare state. While they are rightfully indignant that immigrants could sneak past the border guards and start living off our taxes, this view misses the broader point that there should be no welfare programs for anyone, immigrant or citizen, to mooch from. And it misses another key point, specifically in reference to those immigrants of means and education who would legitimately buy excess housing stock:

These people tend to be highly productive. In 2006, foreign nationals residing in the U.S. were listed as inventors on 25.6% of the patent applications filed in the U.S., up from 7.6% in 1998. A Council of Graduate Schools survey found that in the fall of 2007, 241,095 non-U.S. citizens were enrolled in graduate programs. Some 55% were in engineering and the biological and physical sciences, compared with only 16% of U.S. citizens. In 2007, more people on temporary visas received doctorates in physical sciences and engineering than U.S. citizens.

There is a high correlation between education and incomes, and in today's uncertain economic climate, many wealthy foreigners desire U.S. resident status just as a number in Hong Kong secured residences in Singapore and Canada before the British handover to China in 1997. They rapidly became over a quarter of Vancouver's population, and brought in billions of dollars to buy houses and make other investments.

We could benefit from such an influx. Merrill Lynch estimates that in 2007 there were 10.1 million individuals in the world, 7.1 million outside the U.S., with at least $1 million in financial assets that totaled $29 trillion. If new immigrants bought the 2.4 million excess houses at today's $184,000 median price with funds from abroad, they would bring untold billions. The immigrants would also buy consumer goods, pay taxes, and start many new businesses. {bold added}

Despite the growing amount of socialism in our tragically mixed economy, the U.S. is still one of the last remaining beacons of freedom and entrepreneurialism. The core of this is the freedom to produce, and to keep the fruits of one's productive efforts. Throughout our history, we have benefitted immensely from the immigration of the men of the mind, the men of talent and drive, who have come to America to create their fortunes. We need them now more than ever. And perhaps even more fundamentally, we all need the freedom that their presence would imply.

Let these future innovators come and buy houses, build businesses, and make their and our lives better.