Find the home of your dreams moments after it's listed - Not after it's sold!

What Defunding Immigrant “Sanctuary City” Means For Real Estate

Untitled-4President-elect Donald Trump has pledged to defund “sanctuary cities” if they fail to cooperate with the deportation or incarceration of up to 3 million immigrants who are criminals or have criminal records.

He’s also promised to deport all undocumented immigrants, which could mean 11 million fewer people in the country as a whole.

According to The Economist, “There is no specific legal definition for what constitutes a sanctuary jurisdiction but the term is widely used to refer to American cities, counties or states that protect undocumented immigrants from deportation by limiting cooperation with federal immigration authorities.”

Mayors in sanctuary cities are fighting back, saying that they will resist Trump’s efforts.  The fallout could have far-reaching consequences.

Reince Priebus, President-elect Trump’s new chief of staff, said that Trump is “looking into” cutting millions in funding to so-called sanctuary cities on day one of his presidency.

Priebus added that if sanctuary cities ignore federal law, they can no longer expect to receive federal money.

Despite this threat, mayors of the country’s sanctuary cities have vowed to fight Trump with whatever means available.

New York’s Bill de Blasio, Chicago’s Rahm Emanuel, Los Angeles’s Eric Garcetti and San Francisco’s Ed Lee have all vowed not to back down.

DeBlasio went as far as to say he would destroy a database of undocumented immigrants with city identification cards before handing such records over to the Trump administration.

Trump’s Primary Line Of Attack: Hit Their Pocketbooks…

Trump made it clear during the campaign that he would use money as a primary tool to achieve his goals, whether it is getting Mexico to pay for the wall, placing tariffs on U.S. companies who send jobs outside the U.S., reducing foreign aid or defunding sanctuary cities.

In terms of sanctuary cities, Bloomberg News reports that the President Elect has $650 billion in federally funded leverage.

According to CNN Money, New York City could lose close to $10.4 billion in federal funds of the city’s balanced budget of $83.46 billion.

Rham Emanuel of Chicago proposed a $9.3 billion budget for 2017, $1.3 billion of which is from federal grants.

Other sanctuary cities could face similar shortfalls if they maintain their sanctuary city status.

The Mayors’ Dilemma…

To illustrate the effect of cutting off federal funding, consider how these funds are currently being used in New York City.

Much of the federal funding goes to the Department of Social Services (food stamps, welfare, health care and other benefits), the New York City Housing Authority (Section 8 housing, a choice voucher program for very low-income families) and the Administration for Children’s Services (child welfare, foster care and investigation of suspected child abuse and neglect).

These are all essential services that no rational person wants cut.

The challenge for De Blasio is how to cover a $7 billion shortfall. He would have to raise revenues, probably through tax increases.

City Controller Scott Stringer told The New York Daily News after an analysis of the city’s funds that federal funding provides about 9 percent of the city’s budget and that cutting the funds would be “devastating.”

However, he added, “We are a city that welcomes immigrants — we don’t turn people away based on where they’re from or what language they speak, and that must not change.”

Potential Fallout…

What are some of the ramifications that sanctuary cities might face? Fallout could include:

  • Section 8 landlords could risk default if they are unable to pay their mortgages due to discontinuation of tenant subsidies.
  • Without Section 8 subsidies, tenants could be forced from their homes and possibly become homeless.
  • Increased property taxes could force homeowners who are struggling out of their homes or into foreclosure.
  • Increased taxes would also make it harder for first-time buyers to purchase.
  • The city’s pensioners in places such as New York City could be at risk. Disruption of pension benefits could cause pensioners to lose their home, to forego basic services or to be unable to pay for needed medications.
  • Businesses that serve these groups could go out of business.
  • Increased taxes could cause more individuals and businesses to leave the area. This would reduce the tax base, which could require even higher taxes to cover the shortfall.

What are some of the ramifications of tightening down on immigration as an administration? That fallout could include:

  • Fewer immigrants means less demand for rental housing (and, in some markets, less homebuyer demand).
  • Shortages of skilled workers to help construct homes could become more acute, leading to rising prices for new homes.
  • Changes to international trade policies could make some materials that come from overseas pricier, too.
  • The Washington Post reports a job-loss effect as a result of clamping down on immigration: Deporting workers currently living in the United States would cause businesses to have to compete more heavily for American workers, causing wages to rise, which would likely cause prices to rise; firms losing customers due to those rising prices could be forced out of business.
  • The eighth point on Trump’s immigration policy on his campaign website reads as follows: “Ensure that a biometric entry-exit visa tracking system is fully implemented at all land, air, and sea ports.” This would impact documented immigrants who overstay their work visas and could also have an effect on jobs and skilled-worker shortages in the country.

Hit Employers’ Pocketbooks…

According to the E-Verify website, “E-Verify is an Internet-based system that allows businesses to determine the eligibility of their employees to work in the United States. E-Verify is fast, free and easy to use — and it’s the best way employers can ensure a legal workforce.”

However, E-Verify isn’t foolproof. A report submitted to the Department of Homeland Security that analyzed the accuracy of E-Verify found that “the estimated inaccuracy rate for authorized workers is 0.8 percent with a plausible range from 0.6 to 1.0 percent, and the estimated inaccuracy rate for unauthorized workers is 54 percent with a plausible range of 37 to 64 percent.”

In practice, this means that although E-Verify likely isn’t identifying documented workers as undocumented (0.6 percent to 1.0 percent inaccuracy rate), it is very likely identifying undocumented workers as documented (37 percent to 64 percent inaccuracy rate).

In states with E-Verify mandates, however, fines can be levied against employers who are found to have hired undocumented workers, so mandating nationwide E-Verify usage could have the effect of making employers more careful about hiring paperwork.

Like it or not, Trump isn’t going to back down on his signature campaign issue.

The question is what will the mayors of sanctuary cities do when they could be putting their most needy constituents at risk, and how many employers are going to willingly risk violating E-Verify.