Miran overstated immigration argument, says the economist who wrote the paper

Last Friday I wrote about new Fed Governor Stephen Miran and his argument for cutting rates by 150 basis points before year end.

The crux of it was that Trump’s immigration policy changes would “exert quite a lot of disinflation” by lowering the price of houses and rents. He also cited 1.5 million migrants leaving the country, which is on the extreme end of any reasonable estimates.

In any case, when he laid out his broader argument, he cited a research paper that used a sudden surge in Cuban immigrants to Miami 45 years ago. The idea was that a flow of about 1% in immigration would boost rents by 1%.

However when Miran used it, he didn’t use the total population of the US (340 million) and instead used the 100 million people who rent. By lowering the denominator, he overstated the impact by three fold.

Albert Saiz, the MIT economist who wrote the paper, spoke with Reuters:

“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 has argued that rent inflation will fall by 2 percentage points through 2027.

“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.”

Honestly, I’m sympathetic to Miran’s argument about rent as a population surge in Canada led to skyrocketing rents that are now reversing. The thing is, it’s the same kind of one-off effect as tariffs, which Miran insists on looking through. The analysis also ignores that inflationary effects of depleting the immigrant labor supply.