New Bill to Encourage Foreign Buyers of Real Estate in the US

Senators Charles Schumer (Dem., NY) and Mike Lee (Rep., UT) have prepared a bipartisan bill that would give residence visas to foreigners who buy a house in the US for more than $500,000. The bill is meant to encourage more foreign investment in the US housing market at a time when it is really struggling.

Over the last several years, foreigners have accounted for a growing share of home purchases in areas where the markets have been lagging. In addition to lower home prices, foreigners from countries with a good exchange rate have been able to benefit from favorable housing prices.

In order to incentivize home purchases even further, any foreigner making a $500,000 cash investment can receive a visa. To make the proposal even more attractive, foreigners would be able to divide their $500,000 investment amongst more than one property which may allow an investor to rent out the additional property.

While current visa programs allow foreign investors to enter the US if they invest in a new business that creates jobs, this program would focus on the excess residential properties that are vacant. The program would create more demand for housing without having to artificially decrease prices.

Over the last two years, foreign investment in US residential real estate rose from $66 billion to $82 billion and make up as much as 5.5% of all home sales in some American cities. Canadians accounted for about 25% of foreign home buyers and those from China, Mexico, Great Britain and India made up another quarter of the buyers. Whereas this program would create an immigration rule that would encourage home buyers, current immigration restrictions make it a less desirable investment because buyers aren’t sure if they will be able to live in their new home.

Residential visas gained through the new program would not entitle foreigners to gain a work visa until they went through the existing process for gaining a work visa. Along with their residential visa, investors would be able to gain a visa for their spouse and any unmarried children under the age of 18. These visas would no longer be effective if the investor sells the properties.

The new program would not interfere with anyone currently waiting for other visas and, unlike many other visa programs, there would be no cap on the home-buyer visa program.

Opponents to the new bill think that it is a roundabout way of fixing the housing market without addressing the real issue—the economy. There are plenty of Americans looking to buy homes, but the bad economic outlook is getting in the way. Fix the economy and you fix the housing market, opponents say.

Many Chinese buyers have a problem obtaining visas which gets in the way of buying homes generally. The new bill may provide a huge boost for real estate agents that target areas popular with Chinese clients who have the cash, but do not have the ability to move to the United States once the home is purchased.