Michael Lynd, president and CEO of Lynd, woke in the dead of night to a terrifying thought. The nightmare? “The crackdown in immigration … is a meaningful threat to our business,” Lynd said. He walked through the dark silence of his home to his computer and emailed his team, instructing them to sign all construction contracts as soon as possible.

A study by the University of Texas estimated that half of Texas construction workers are undocumented. The report also found that U.S.-born construction workers earned an average of $3.12/hour more than undocumented workers, who reported earning an average of $11.10/hour.

“There are millions and millions of undocumented workers holding our costs down. If we see that labor migrate back to Mexico or somewhere else, it will bring about meaningful inflation to our costs,” Lynd said. “Labor and subcontract cost is outpacing rent growth. It all continues to eat into your margin.”

Fulfilling his campaign promise, President Donald Trump has directed his administration to more seriously enforce the nation’s immigration laws. On Tuesday, the Department of Homeland Security revealed the scope of the president’s plan. Two memos signed by Homeland Security Secretary John Kelly laid out new provisions, including the hiring of thousands of new border patrol and immigration enforcement agents, the creation of a new office within the Department of Homeland Security to work with the victims of crimes committed by unauthorized immigrants, and an expansion of the number of unauthorized immigrants who can be deported through an expedited process.

The practical effect is not clear, but administration officials insist the move is not a prelude to mass deportations. Still, Lynd (above, left) is worried about the perception.

“It’s becoming public enough that this will create a migration of a lot of the workforce building our projects. [Undocumented immigrants are] asking themselves who stays and who goes, how they stay with their kids or their wife if they have different legal status. These are really tough questions, so what they end up doing is flowing out,” Lynd said. Kyle Hagerty, Bisnow

USAA Real Estate managing director Hailey Ghalib said the other side of the equation is material cost and the administration’s policies on infrastructure spending. If the Trump administration follows through on its list of infrastructure priorities, “that will put upward pressure on material and labor costs, especially … concrete and steel. It’s something that could potentially impact the cost of our buildings,” she said. Alan Stark/Wikimedia Commons

There is also concern from a demand standpoint. In recent years value-add assets have risen to prominence among investors. Lynd warned, “Those guys in value-add, I’d be concerned about demand. Immigrant families are households … I was in Phoenix when immigrants left. It wasn’t fun watching rents fall from $900 to $500.”

Lynd was referencing the actions of Maricopa County Sheriff Joe Arpaio, “America’s Toughest Sheriff,” who cracked down on immigrants throughout the county, including Phoenix. The U.S. Department of Justice eventually concluded that Arpaio oversaw the worst pattern of racial profiling in U.S. history, and filed suit against him for unlawful discriminatory police conduct.

Latest estimates show nearly 2 million illegal immigrants live in Texas, nearly 20% of the nation’s total. The Texas-Mexico border makes up 1,254 miles of the 1,900-mile connection between the countries, putting the state on the front lines in the fight against illegal immigration. This year, multifamily executives will have one eye on the slowing markets and the other on Washington, DC.