Without immigrants, prices would soar, experts agree

08:56 AM MST on Wednesday, June 14, 2006

By Brady McCombs and Thomas Stauffer / Arizona Daily Star

It's the dream home Robert and Alva Armenta thought was beyond their reach — a two-story, three-bedroom, coffee-with-milk-colored stucco near the base of "A" Mountain.

The Spanish-language talk radio that blends with the pounding of hammers at their growing subdivision hints at what helps keep new homes affordable: illegal-immigrant workers.

Illegal laborers, mostly from Mexico and other parts of Latin America, make up at least 34 percent of Arizona's home-building industry, based on estimates from the Pew Hispanic Center, a nonpartisan research group. Two dozen legal and illegal local workers told the Star that in their experience, the percentage is more than half.

Without illegal labor, home builders would have to pay more to entice workers from other parts of the country or those employed here in other industries. Star research based on economists' projections estimates that illegal labor holds down prices by as much as $38,000 on a median-priced $267,000 Tucson home.

That's unlikely to change much, despite wrangling set to begin within weeks between the U.S. House and Senate over their widely divergent proposals to revamp the nation's immigration laws.

The plans fall short of the multipronged approach needed for real reform, according to an Arizona Daily Star investigation based on interviews with dozens of academics, analysts and employers. Tangible change demands a fraud-proof system to verify legal workers and a wholesale overhaul that would penalize more employers of illegal immigrants and force the sharing of critical information among federal agencies.

That would take years and cost billions, say several researchers who study immigration. If achieved, those changes could take Americans someplace they don't want to be: Big business may be reluctant to do anything to slow the growth of Tucson's $2 billion-a-year home-building industry, researchers say. And buyers may balk at higher prices and longer waits for their new homes, builders fear.

Home builders scoff at the notion that they could absorb the higher cost of legal labor without passing it on to buyers. Increased land and materials prices already have cut into profits to such an extent that some builders say they may leave the industry altogether.

"The people who are going to be most affected by this are the ones who have the least ability to pay," Tucson builder Michael Keith says. "The impact on affordable housing — on entry-level housing and low-income rentals — could be catastrophic."

Substitute workers

Experts agree on this much: Remove every illegal immigrant from Tucson's 27,000-worker home-building industry tomorrow and wages would spike.

"Everyone is going to be competing for a smaller pool of available workers, and only the people who pay the highest price are going to get them," Keith says.

In a market already short by an estimated 5,000 workers, the average wage could double in such a scenario, Keith says. The average hourly wage for Tucson construction workers is $14.42, Bureau of Labor Statistics estimates for March show. That ranks below wages in Western cities including Phoenix, Salt Lake City, Denver, Las Vegas, Los Angeles, San Diego, Seattle and Portland, Ore. — and the national average.

There's no way to know for sure whether higher wages would attract enough legal workers. With a national unemployment rate for construction workers of 11 percent, bigger paychecks would draw plenty of workers to Arizona, says Steven Camarota of the Washington, D.C.-based Center for Immigration Studies, which supports tighter immigration controls.

But smaller families and a decreasing number of entry-level workers make Princeton University sociologist Douglas Massey question whether better wages could make a difference.

"I'm not sure whether there is enough domestic labor to cover the shortfall," says Massey, who has studied international migration for nearly three decades.

Waiting times could increase

If builders couldn't find enough workers even at higher wages, it would take longer to build a house, increasing waiting times for impatient buyers. It now takes about nine months to build a new house in the Western United States, U.S. Census Bureau data from 2005 show.

Longer construction times would boost the likelihood that materials costs would rise, so subcontractors would need to factor that into their bids, Keith says.

"The cost of building that house, just from the extra time alone, is going to go up," he says.

Construction-material costs grew by 10 percent in 2004 and 6 percent last year, says a survey by the Associated General Contractors of America, partly due to demand for materials from a building boom in China.

Builders say it's unrealistic to expect them to absorb increases in labor costs. The profit margin on a house built last year averaged just below 10 percent — 2 percentage points lower than in 2002, according to the National Association of Home Builders. A more expensive, all-legal work force could push profits even lower, builders say.

Forced modernization

In the long run, eliminating the illegal work force could push home builders toward advances that have reshaped the industry in Europe and Japan, says Camarota, of the Center for Immigration Studies.

Modular homes are built on a foundation but feature components such as wall units that are built at factories and shipped to homesites. They've already taken hold in other countries — but not here, where the supply of cheaper, illegal labor has let U.S. home builders avoid the high start-up costs of modernization, Camarota says.

In a 2002 report, researchers at the Massachusetts Institute of Technology characterized the U.S. home-building industry as labor-intensive, resistant to change and "far behind other industries" in adopting new modular systems that could ultimately give buyers more choices at better prices.

"In Europe and Japan, there is a lot more automated, prefab housing that's being used as a result of the labor shortage, in the same way that Australia has been moving to machine harvesting in farming," Camarota says. "The idea is that if you have plenty of unskilled workers, you don't have to take on those technological advances, and America hasn't had to modernize."

Sacrifice worth it to family

A year ago, Robert and Alva Armenta were fed up with gangs bullying their sons in their former West Side neighborhood.

They found the 2,010-square-foot house they wanted in a safe neighborhood they coveted, but they considered themselves long shots to qualify for it.

"Our initial thoughts were, 'Oh man — maybe it's too much,' " says Robert Armenta, 63. "Then we said one day: 'The heck with it. Let's go try for it.' "

Based on the couple's income from Alva's two rental properties, Robert's retirement and their two Tucson Citizen newspaper routes, they were approved for a $198,000 loan.

Had the price been any steeper, the Armentas say, they'd still be in their old neighborhood. And for Alva's 11-year-old and 13-year-old sons, that would mean facing the gangs.

The Armentas don't have strong opinions on the illegal-immigration debate, but they say they generally favor stricter controls.

"I don't think it's fair that they can come to a country and get everything that comes from a country, and it seems like they don't have to put anything back into it," says Alva Armenta, 44.

They wonder whether illegal workers have helped build their house. But they won't lose sleep over immigration-overhaul proposals that may determine the fate of future workers. They have their dream house in their ideal neighborhood.

"I feel safer," Alva Armenta says. "And it's a better future for my kids, because I don't have to worry about them growing up in the neighborhood where they were. I know they are prouder and happier."

For more Arizona news, visit www.azstarnet.com or www.azfamily.com.

©The Arizona Daily Star, 2006