Proposed Senate Plan Seeks to Award Residency Visas to Foreign Investors in U.S. Real Estate
The collapse of the housing market and the ensuing recession has left a massive supply of unsold homes all over the country. Since the peak of the housing bubble in 2006 home values have seen an average decline of 33%. The drop in home prices combined with a lack of demand means that there is a glut of unsold homes in the market today. This excess supply is slowing down the recovery of the U.S. housing market, and is the impetus behind a bold new bipartisan plan by Senators Charles E. Schumer (D-NY) and Mike Lee (R-UT) to boost demand by encouraging foreign investors.
The Proposed Program
Essentially the bipartisan proposal offers residency visas to foreign nationals who invest at least $500,000 in residential real estate (single-family house, condo or townhouse) in the United States. Applicants have the option of splitting their investment between a primary residence, and an additional rental property. At least $250,000 must be spent on a primary residence where the applicant will have to stay for at least 180 days out of the year, while the remainder can be spent on a rental property investment. The visa would also allow spouses and minor children to enter the U.S. on the same conditions as the home purchaser.
Limitations of the Program
The proposed visa program, while offering foreign nationals a convenient way to invest and stay in the U.S., is not a path to citizenship. There are several limitations to the program
* Real estate investment visa holder will not be eligible to work in the country – he or she will have to apply for a regular work visa to seek employment in the U.S.
* Visa holder will have to stay in the U.S. for 180 days out of each year and pay all local and federal taxes.
* All applicants to the real estate investment visa program will be subject to standard criminal and national security background checks.
* Visa holders and their families will not be eligible for government benefits such as Medicare, Medicaid, and Social Security.
*If the invested property is sold to another party, the visa automatically lapses, requiring the visa holder and their family to leave the country.
In spite of the above limitations, the proposed visa plan has already generated a huge amount of buzz both at home and abroad, and is projected to attract a sizable investment in the U.S. real estate market.
Backers of the Proposed Real Estate Investment Visa Plan
Real estate analysts who have studied the proposal have stated that it could raise demand for U.S. homes and help ease the housing crisis. Supporters of the plan believe that the initiative would soak up an excess supply of inventory at a time when the vast majority of American home buyers are holding back.
The plan even has some heavy hitters of the financial markets excited. Mortgage-bond pioneer Lewis Ranieri hopes that the measure could also help turn around buyer psychology, saying that the proposed program represented “triage” for a housing market that needs more fixes.
Even Warren Buffet, who recently made headlines calling for higher taxes on millionaires, is a supporter of the plan. Buffet, a long-time advocate of encouraging “rich immigrants” to buy homes, states:
“If you wanted to change your immigration policy so that you let 500,000 families in but they have to have a significant net worth and everything, you’d solve things very quickly.”
The Schumer-Lee bill has also received endorsements from the U.S. Chamber of Commerce, the U.S. Travel Association, the American Hotel & Lodging Association and the U.S. Olympic Committee.
Foreign Investment in U.S. Real Estate – Facts & Figures
Regardless of the success or failure of the proposed plan in the Senate, foreign buyers are already taking advantage of the weak U.S. housing market, snapping up investment properties at bargain prices.
Attracted by reduced prices and (thanks to a declining value of the U.S. Dollar) a favorable exchange rate, foreigners now account for a growing share of home purchases in South Florida, Southern California, Arizona and other hard-hit real estate markets.
Figures from the National Association of Realtors show that over the past year Canadians accounted for one quarter of foreign home buyers, with buyers from India, China, Mexico and Great Britain making up another quarter.
International buyers were responsible for $82 billion in U.S. residential real-estate sales for the year ending in March, a huge increase over the $66 billion invested in the previous year period, according to data from the National Association of REALTORS. Australians alone invested $600 million in US property last year.
Closer to home, it’s hard to know what the figures are and what percentage of buyers in San Diego are foreign nationals. (I Tried searching but could not find any credible information) I know personally that we have helped dozens of foreign home buyers from Mexico and Canada purchase second homes. If they had an additional incentive I think we would see a large increase in purchases.
Markets with warmer climates are especially attractive to foreign buyers, many of whom are Canadian “snowbirds” looking for a warm place to escape to during the winter. A great climate, strong local economy and highly desirable housing prices make San Diego real estate an ideal target for foreign buyers.