Lost Customers Flagged as Emerging Risk in Immigration Crackdown

Companies are warning of a handful of consequential immigration enforcement risks beyond workforce shortages, showing how the Trump administration’s policy changes are rattling business operations.

A dwindling customer base, fewer real estate tenants, and greater lending caution were among concerns roughly a dozen S&P 500 companies—including T-Mobile US Inc., Equity Residential, and M&T Bank Corp. —flagged on recent earnings calls with analysts and in public filings.

Businesses such as Robinhood Markets Inc. and Qualcomm Inc. have joined the ranks of companies warning about talent recruiting and retention issues amid the federal immigration crackdown. But the latest types of alerts illustrate how the US immigration landscape is stoking fears about demand and other basic economic principles.

“There’s always a question about the magnitude of these effects, but the logic is kind of inescapable,” said Ben Zipperer, senior economist at the Economic Policy Institute. “If you want a growing population of workers or a growing population of consumers, you have to have immigration. There’s no way around it.”

More immigration enforcement or new immigration policies means fewer workers, which means fewer people spending paychecks, Zipperer said.

The immigrant population decreased by at least 1 million people in the first half of the year alone, and the Trump administration unleashed changes further complicating immigrants’ ability to legally live in the US.

It makes sense, then, that customer bases are shrinking, said Chris Thomas, a partner at Holland & Hart LLP’s immigration practice. “There’s no question that there’s a drop,” he said.

Impact on Business

T-Mobile, for instance, said it expects wireless industry customer growth to moderate compared to historical growth rates.

“The wireless industry, broadly, is dependent on population growth, including growth in the immigrant population,” the carrier said in a recent quarterly report.

More traditional consumer industries like telecom aren’t the only ones relying on a steady stream of customers. Health-care company DaVita Inc. gets one-third of its dialysis service revenue from private insurance companies. Immigration restrictions could affect the number of people on private insurance plans, which are often work-sponsored, putting a dent in profits, the company said in a late October 8-K form.

In the financial sector, M&T Bank Corp. is considering whether borrowers might be affected by immigration restrictions when grading loan risk, it said in a late October quarterly filing. Those customers include certain nonprofits, government contractors, and other businesses.

The bank’s warning on immigration could be related to the September bankruptcy of subprime auto lender Tricolor Holdings, which largely marketed to undocumented immigrants, said Nathan Dean, senior policy analyst at Bloomberg Intelligence. One of Tricolor’s lenders, JPMorgan Chase, saw a $170 million loss shortly after, Bloomberg News reported.

“This is M&T’s way of saying, ‘We are looking at our portfolio to resolve questions about lending,’” Dean said.

A half-dozen public real estate companies, including UDR Inc. and Mid-America Apartment Communities Inc., also talked about immigration policy in filings or on calls since late October. But not all say its impact will be a net negative.

H-1B Complications

Life science real estate trust Alexandria Real Estate Equities Inc. says changes to H-1B visa policy, which include a new $100,000 application fee, could drive away biotechnology workers, leaving its core business with fewer tenants.

“The reduced attractiveness of the U.S. as a destination for research and commercialization could lead to a substantial long-term decline” in both its tenant base and its life science real estate holdings generally, the company said in a late October quarterly report.

Residential real estate demand has faded recently, and it’s possible that immigration is a contributing factor, said Jeffrey Langbaum, senior real estate investment trust analyst with Bloomberg Intelligence.

“We clearly hear the question often on earnings calls and in general,” but “it’s hard to splice it out with any specificity,” Langbaum said. “There’s clearly smoke. Whether or not that smoke turns to fire, it’s still too early to know.”

Immigration challenges and research funding cuts are “chipping away” at rental housing demand in Boston, a city with more than 1,000 biotechnology companies, apartment investor Equity Residential said. Biotechnology work relies heavily on H-1B visa holders.

“It’s a very seasonal market in general,” Michael Manelis, Equity Residential’s chief operating officer, said of Boston during a late October earnings call. “What we’ve seen right now is just a little bit more softening than you otherwise would have expected.”

But Barb Pak, chief financial officer at real estate developer and investor Essex Property Trust Inc., says the H-1B fee could be good news for her company. Large employers will be able to pay the $100,000 application fee directly and cut out costs for immigration consultants, she said.

“It may actually become a net benefit,” she said on a recent earnings call.