Peter Coy writing on the Business Week Hot Properties blog asked why there have been so few layoffs in the housing industry as business has slumped.

One of the greatest mysteries of the housing slump is why there have been so few layoffs in residential construction. The mystery deepened today when the Bureau of Labor Statistics announced a seasonally adjusted employment decline of just 800 jobs in May. That’s less than a rounding error, meaning that essentially there was no change in the number of people building homes in spite of the widely reported decline in construction. via Hot Property

Well, the National Association of Home Builders may have an answer in their May 16th, 2007 press release on language in the immigration bill before Congress.

Any provision that would hold general contractors responsible for the hiring decisions made by their subcontractors could have significant repercussions for the nation’s business community.

“Such a change in our immigration laws would be unfair, disruptive and almost impossible to enforce. In effect, U.S. employers would be required to literally verify the legal status of millions of workers they never hired. For residential construction, this would drive up the cost of housing and devastate an industry already reeling from the effects of the worst housing downturn in almost two decades. And there is the rub. The housing industry has perfected the rules of plausible deniability. The developers do not hire the people building their homes, they hire subcontractors. And these subcontractors, with a nudge, nudge, wink, wink, are responsible for making sure that the residency status of the employees is legitimate. via NAHB

So Mega Builder contracts with Jose’s Painting to paint all the homes in their subdivision. It is Jose’s Painting that will take the fall if any of the employees are busted for immigration violations. Mega Builder has plausible deniability while building the homes with cheap and illegal labor.

If INS or any one else comes after Jose’s Painting, the next day the same crews arrive on site in trucks bearing Pedro’s Painting, with a new agreement done at the site of Mega Builder.

As long as the Federal Government does not enforce the immigration codes, understanding the employment statistics in housing will never make sense. But the builders will be laughing all the way to the bank. They will have cheap labor and a very flexible workforce without any culpability for legal consequences.

Related posts:

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2. New Construction Seen At Bottom, Opportunities Arising For Builders
3. Who Is Watching Fannie And Freddie? Answer Nobody Now. Internal Auditor Fired
4. Housing Starts Down 54.2 Percent For April, 2009
5. Home Construction Drops 16.6 Percent In January, 2009