An economist whose research provided a foundation for Federal Reserve Governor Stephen Miran’s argument that President Donald Trump’s immigration crackdown will slow inflation by cutting demand for housing says the new central banker is overstating the impact.
After Reuters queried the Fed about Miran’s numbers, it updated his speech from Monday to clarify that the estimate is based on a “large quasi-random immigration shock,” a reference to the Cuban refugees who suddenly sought housing in the Miami area 45 years ago.
A Fed spokesperson did not immediately respond to a request for comment.
The work from Albert Saiz, an MIT economist who has studied immigration and housing for decades, shows that an inflow of immigration equal to 1% of the population of a city leads to about a 1% increase in rents in that city. Other researchers have also found such impacts – some bigger, some smaller – and Saiz told Reuters he does not argue with the idea that reversing the inflow will tend to reduce rents.
Miran, in his debut speech as the Fed’s newest policymaker, latched onto that idea but didn’t follow Saiz’s formula – choosing an estimate of the national renter population of about 100 million people as his denominator rather than the far-larger total U.S. population of 340 million. The result was an imputed impact on inflation about three times larger than using Saiz’s formula.
“If you did the calculation using the right magnitudes, you get 1 divided by 340 million – that’s about 0.29 percent a year,” Saiz said in an interview. “Obviously population growth does impact the price of housing, but the magnitude isn’t big enough to justify major changes in monetary policy.”
Miran argues that net-zero immigration under Trump’s new border policies implies 1 percentage point-per-year lower rent inflation. He bases that on a 2003 Saiz paper that looked at how a sudden influx of Cubans into Miami in 1980 – the so-called Mariel boatlift – impacted rental prices in that city. That paper did look at how much that influx expanded Miami’s renter population.
A second Saiz paper in 2007 – and much but not all of the subsequent international literature on the subject – suggests a more limited effect.
It retains Miran’s original estimate that rent inflation in the consumer price index will fall 2 percentage points through 2027 – equal to his estimate of the rental inflation effect based on his reading of Saiz. That drop would pull total inflation by the measure the Fed uses – the 12-month personal consumption expenditure index — down by 0.4 percentage points by early 2028, justifying a half-point reduction in the Fed’s policy rate, he said in the speech.
“One might characterize this view on rental inflation as optimistic,” Miran said. “However, I believe forecasters have underappreciated the significant impact of immigration policy on rent inflation—both on the way up and, now, on the way down.”
Overall Miran says Fed policy is fully 2 percentage points too high, a view that does not have any other takers among the Fed’s other 18 policymakers.