Texas Governor Greg Abbott recently announced that he would seek legislation to ban Chinese investors from buying real estate in the state. In 2021, he signed the Lone Star Infrastructure Protection Act into law preventing commercial entities associated with “enemy nations” from purchasing land near (or connected to) critical infrastructure. This was in response to a Chinese billionaire who bought a large land to build a wind farm. Other governors, such as Ron DeSantis of Florida, are considering a similar ban that would extend to non-residents from China.
This trend extends to other countries as well, with Canada’s left-leaning federal government recently announcing that it would ban foreign nationals who are not legal residents from purchasing residential property in Canada. Residents who have been in Canada for less than two years will also be prohibited from doing so. The proposal was drafted without referring to any ethnic group, but the truth is that it is largely aimed at Chinese citizens. Even municipal governments are getting involved. In 2016, the City of Vancouver imposed a 15 percent tax on foreign homebuyers. While the Chinese were not named in the legislation, it was clear in the political discussions that they were the target. The mayor of Atlanta is considering the same kind of restrictions.
The common denominator of these policy proposals is not ideology, as both left-wing and right-wing governments have developed them. Rather, it is the claim that Chinese buyers are increasing demand for real estate and housing in some of the major urban markets (Los Angeles, Vancouver, Toronto, Atlanta, Boston, and New York). Some believe that restricting this foreign demand will ease upward pressure on rents and new home prices. Sure, there is some national security wrap around the proposals, but the primary intent is to cater to urban voters who seem wary of rising rents in big cities.
There are two strong reasons to resist xenophobic – for there is no better term – policy propositions. The first is that pressure on home prices has nothing to do with rising demand; It is about inelastic supply. Cities where the backlash against foreign buyers of real estate is generally strongest are known for restrictive zoning policies, land use regulations, building regulations, and building codes that make it nearly impossible to add housing units. This makes housing supply very inelastic.
The more inelastic the supply, the greater the price increase when demand shifts upward. This means that the root cause of rising rents and house prices is poor housing policy which constrains the supply side. The impact of some additional Chinese buyers pales in comparison to the harmful effects of supply-restriction measures.
However, there is another reason to resist this suggestion. Much more important from a moral point of view. Bans make it easier for the Chinese government to abuse its own citizens.
The Chinese government frequently confiscates the assets of dissidents, well-known members of the government, and important businessmen. This strips them and their families of any wealth they may possess. Sometimes, as in the case of outright corruption, the seizure of assets appears justified. However, corruption charges are sometimes imposed purely for political expediency. Sometimes, as with the July 2022 riots, assets are seized or frozen for undisclosed reasons. Often, it is used as punishment against entrepreneurs, dissidents, and critics of the regime.
Powers to forfeit assets are also increasing. In the midst of the COVID pandemic, for example, the Chinese government has given President Xi Jinping powers to seize assets from organizations that have complied with foreign sanctions against China.
For Chinese nationals, buying real estate abroad is a way to protect part of their wealth by placing it out of the reach of the Chinese government. If they manage to escape China, the targeted individuals have a safety cushion to rely on once they reach Western countries. This not only protects them from CCP predation, but may also limit the potential extent of such predation. If the Chinese government had complete control over the capital assets of its citizens, it would be better able to seize resources that could be used to equip the army making threatening moves against Taiwan, or in implementing genocidal policies against the Uyghurs in western China. Inability to grab Some The wealth of a small minority of Chinese makes the world a little better place than it could have been.
For years now, politicians of all political stripes have engaged in empty manifestations of virtue signals on the topic of human rights. I say “empty” and “signal of virtue” with reason. In fact, by engaging in unjustified and counterproductive anti-Chinese politics, they have shown that their commitment to human rights is just paper. If they really cared, they would realize that they are helping one of the world’s most evil governments tighten their grip on power. Even worse, they may be aware of, and simply refuse to act on, their stated principles.