The debate over whether foreign investment in United States real estate is good for the country or not has been simmering for decades…
The debate over whether foreign investment in United States real estate is good for the country or not has been simmering for decades. There are arguments that can be made in good faith on both sides. Lately, however, government officials and others are sounding alarms that the debate is no longer being waged solely on the merits.
According to a recent New York Times article (How U.S.-China Tensions Could Affect Who Buys the House Next Door, February 7, 2023) the Texas legislature is considering a proposal to prohibit all citizens and companies from China from buying real estate (commercial or residential) in the state. Governor Gregg Abbott has already indicated his support for the ban. The article cited other Governors, such as Ron DeSantis of Florida and Glenn Youngkin of Virginia, who have also expressed opposition to investment in U.S. real estate from China. In California, a bill to set limits on foreign ownership of farmland passed both houses of the legislature last year. The bill was vetoed by Governor Gavin Newsom.
Over the years, the pros and cons of foreign investment in U.S. real estate have centered more or less around familiar themes.
The Arguments for More Restriction On Foreign Investment
Those who favor a more restrictive approach argue that such limits are necessary to a) protect domestic buyers from being priced out of the market as increased competition drives up prices, b) protect American national security interests as foreign investments may be used either for intelligence surveillance or to influence U.S. politics and law, or c) to steer foreign investment into other sectors, such as manufacturing, infrastructure or technology, to help promote job creation throughout the economy beyond real estate.
The Arguments for Less Restriction On Foreign Investment
Advocates of a more open policy on foreign investment argue that excessive restrictions will a) hurt the economy by decreasing investment, thereby causing a reduction in property values, fewer construction projects, and less capital that could be used for economic development, b) reduce the tax revenue generated when foreign investors buy real estate, which could then lead to cuts in local services or the need for tax increases to pay for those services, and c) result in retaliation from those countries who are subject to the U.S. restrictions, leading to fewer overseas investment opportunities for Americans and an overall decline in global economic activity and trade relations.
Existing Restrictions
There are already a number of laws and policies in the U.S. that restrict foreign investment in real estate. The Committee on Foreign Investment in the United States (CFIUS), for example, is a collection of federal agencies designed to review foreign investments in the U.S. and block such investments that are deemed to present a national security risk. The Committee has been actively operating since 1975 and its scope of authority has been expanded multiple times since, most recently by an Executive Order of President Biden in September 2022.
Civil Liberties Concerns
Lately however, opponents of a more restrictive approach, particularly like the one proposed in Texas, are expressing concerns that the latest proposals and policies are no longer based on the traditional arguments but on more sinister motivations. In Texas, for example, opponents of the bill currently under consideration, including the Mayor of Houston, Sylvestor Turner, say that it is motivated more by anti-Chinese sentiment than any concern over national security. They cite the provisions of the bill that would prohibit investments (including buying a home) by Chinese immigrants already living in the state. Lawyers with the American Civil Liberties Union of Texas have already said such a law would be unconstitutional, as it would discriminate against Chinese people holding dual citizenships or legal permanent residency (such as green card holders). While the legislator who authored the Texas bill recently stated she would amend it so it would not apply to permanent residents, the prohibition on buying property would still include recent immigrants and those on temporary work visas.
In a climate of increasing violence against Asian Americans, and heated political rhetoric aimed at China, it will be up to responsible lawmakers and the American public to make sure laws and policies are founded upon legitimate policy objectives and not an agenda that targets any particular group of people for discrimination.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Bruce Feffer, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Fred D. Zemel Appointed Chair of Strategic Planning at Scarinci & Hollenbeck, LLC
Business Transactional Attorney Zemel to Spearhead Strategic Initiatives for Continued Growth and Innovation Little Falls, NJ – February 21, 2025 – Scarinci & Hollenbeck, LLC is pleased to announce that Partner Fred D. Zemel has been named Chair of the firm’s Strategic Planning Committee. In this role, Mr. Zemel will lead the committee in identifying, […]
Novation Agreement Process: Step-by-Step Guide for Businesses
Big changes sometimes occur during the life cycle of a contract. Cancelling a contract outright can be bad for your reputation and your bottom line. Businesses need to know how to best address a change in circumstances, while also protecting their legal rights. One option is to transfer the “benefits and the burdens” of a […]
What Is a Trade Secret? Key Elements and Legal Protections Explained
What is a trade secret and why you you protect them? Technology has made trade secret theft even easier and more prevalent. In fact, businesses lose billions of dollars every year due to trade secret theft committed by employees, competitors, and even foreign governments. But what is a trade secret? And how do you protect […]
What Is Title Insurance? Safeguarding Against Title Defects
If you are considering the purchase of a property, you may wonder — what is title insurance, do I need it, and why do I need it? Even seasoned property owners may question if the added expense and extra paperwork is really necessary, especially considering that people and entities insured by title insurance make fewer […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Good Policy or Discrimination? The Debate Over Foreign Investment in U.S. Real Estate Heats Up
Author: Bruce Feffer
The debate over whether foreign investment in United States real estate is good for the country or not has been simmering for decades…
The debate over whether foreign investment in United States real estate is good for the country or not has been simmering for decades. There are arguments that can be made in good faith on both sides. Lately, however, government officials and others are sounding alarms that the debate is no longer being waged solely on the merits.
According to a recent New York Times article (How U.S.-China Tensions Could Affect Who Buys the House Next Door, February 7, 2023) the Texas legislature is considering a proposal to prohibit all citizens and companies from China from buying real estate (commercial or residential) in the state. Governor Gregg Abbott has already indicated his support for the ban. The article cited other Governors, such as Ron DeSantis of Florida and Glenn Youngkin of Virginia, who have also expressed opposition to investment in U.S. real estate from China. In California, a bill to set limits on foreign ownership of farmland passed both houses of the legislature last year. The bill was vetoed by Governor Gavin Newsom.
Over the years, the pros and cons of foreign investment in U.S. real estate have centered more or less around familiar themes.
The Arguments for More Restriction On Foreign Investment
Those who favor a more restrictive approach argue that such limits are necessary to a) protect domestic buyers from being priced out of the market as increased competition drives up prices, b) protect American national security interests as foreign investments may be used either for intelligence surveillance or to influence U.S. politics and law, or c) to steer foreign investment into other sectors, such as manufacturing, infrastructure or technology, to help promote job creation throughout the economy beyond real estate.
The Arguments for Less Restriction On Foreign Investment
Advocates of a more open policy on foreign investment argue that excessive restrictions will a) hurt the economy by decreasing investment, thereby causing a reduction in property values, fewer construction projects, and less capital that could be used for economic development, b) reduce the tax revenue generated when foreign investors buy real estate, which could then lead to cuts in local services or the need for tax increases to pay for those services, and c) result in retaliation from those countries who are subject to the U.S. restrictions, leading to fewer overseas investment opportunities for Americans and an overall decline in global economic activity and trade relations.
Existing Restrictions
There are already a number of laws and policies in the U.S. that restrict foreign investment in real estate. The Committee on Foreign Investment in the United States (CFIUS), for example, is a collection of federal agencies designed to review foreign investments in the U.S. and block such investments that are deemed to present a national security risk. The Committee has been actively operating since 1975 and its scope of authority has been expanded multiple times since, most recently by an Executive Order of President Biden in September 2022.
Civil Liberties Concerns
Lately however, opponents of a more restrictive approach, particularly like the one proposed in Texas, are expressing concerns that the latest proposals and policies are no longer based on the traditional arguments but on more sinister motivations. In Texas, for example, opponents of the bill currently under consideration, including the Mayor of Houston, Sylvestor Turner, say that it is motivated more by anti-Chinese sentiment than any concern over national security. They cite the provisions of the bill that would prohibit investments (including buying a home) by Chinese immigrants already living in the state. Lawyers with the American Civil Liberties Union of Texas have already said such a law would be unconstitutional, as it would discriminate against Chinese people holding dual citizenships or legal permanent residency (such as green card holders). While the legislator who authored the Texas bill recently stated she would amend it so it would not apply to permanent residents, the prohibition on buying property would still include recent immigrants and those on temporary work visas.
In a climate of increasing violence against Asian Americans, and heated political rhetoric aimed at China, it will be up to responsible lawmakers and the American public to make sure laws and policies are founded upon legitimate policy objectives and not an agenda that targets any particular group of people for discrimination.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Bruce Feffer, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
