A manufacturing boom in New Mexico is likely to bring jobs and growth to the state – but it may also exacerbate an existing housing crisis.
The boom is partially due to the Biden administration’s 2022 CHIPS and Science Act, which is aimed at stimulating the domestic production of semiconductors. In response, companies have flocked to the Southwest, looking to build or expand plants in states with plenty of land and relatively lax labor laws.
Perhaps no state in the region is poised for as dramatic a transformation as tiny New Mexico, among the top ten states in the country with the steepest rise in manufacturing employment. There, the number of manufacturing jobs has increased by 7 percent, or two thousand workers between February 2020 and December 2023.
But the flood of new jobs comes at a time when the state is also experiencing a housing crunch: between December 2019 and 2023, median housing prices grew almost 50 percent, according to data collected by the New Mexico Association of Realtors. Evidence is mounting that as manufacturers expand into the state, likely bringing highly skilled workers with them, they could further drive up local housing costs.
Already, homeownership is increasingly out of reach for many in the state. In 2022, more than 80 percent of New Mexicans who make $50,000 a year and have a mortgage spend more than a third of their household income on that mortgage.
“The only reason I can live in Santa Fe is because I bought my property 40 years ago,” said Mark Oldknow, who works for the New Mexico Coalition for the Homeless.
In some cases, the increase in costs have driven people out of their homes entirely. The state’s homeless population spiked 50 percent between 2022 and 2023, according to a survey conducted by the Department of Housing and Urban Development. This was the second-highest percentage increase in the country, behind New Hampshire.
“New Mexico recognizes, and I think we’re kind of a poster child for the insight that a lot of what drives homelessness is access to affordable housing,” said Oldknow.
Median housing costs have increased almost 50 percent between 2019 and 2023. Credit: New Mexico Association of Realtors. Graphics credit: Elisa Muyl
The increase in housing cost is driven in part by a crunch in the housing supply. Since 2020, the state has experienced the lowest housing vacancy rates in over 30 years, dropping to just 0.9 percent in 2023. While the number of permits for new housing units has risen steadily since the pandemic, including a dramatic spike in November 2023, the pace of new construction has not kept up with demand.
“We’re not producing houses at the rate that we probably need to in order to keep things in equilibrium,” said Professor Michael O’Donnell, an economist at the University of New Mexico. “The supply and demand are really out of whack.” The influx of CHIPS Act jobs may aggravate this dynamic, as it’s likely that a portion of new jobs will go to out-of-state or foreign workers moving to New Mexico. According to reporting by Yahoo Finance, the Taiwanese chip manufacturer TSMC delayed the opening of its first plant in Arizona after immigration barriers created a worker shortage. According to Yahoo, a third of semiconductor industry employees are foreign-born.
“It will attract, in some cases, people from other countries, where they have a stronger industry for building these sorts of things. I can imagine that there’s a lot of people coming over from Taiwan and South Korea,” said Tom Simons, senior economist at Jeffries, speaking about the CHIPS Act. “And they’re going to have to be lured over with reasonable compensation.”
Economists in other states are wary of new CHIPS Act facilities and their impact on the local housing market. In Ohio, where Intel is building a $20 billion chip manufacturing plant, economists are concerned about housing costs, according to Kathy Bostjancic, the Chief US economist for Nationwide Mutual.
“On the surface, it sounds great – wow, we’re creating jobs – it also means you could be luring more workers to that area and is there enough housing for them, and if not, that starts to push up rental and home prices, which is a big issue in the US,” Bostjancic said.
But New Mexicans hope that the new or expanding semiconductor manufacturers will engage in the kinds of knowledge-sharing that’s going to ultimately help the next generation of the New Mexican workforce be at the center of the semiconductor manufacturing boom.
“You don’t want a company to come in and, basically, locals become the janitorial staff for a large enclave of professionals that are now moving in and making everything more expensive,” said Professor Manuel Montoya, who teaches at the University of New Mexico’s management school. “But a generation from now, another measure is the degree to which [the] janitorial staff’s children are able to have access to these types of opportunities.”
He added: “The onus, then, is on investment from these companies on education.”