What Do Changes in U.S. Immigration Law Mean for Foreign Investment in Real Estate? | Chicago Association of REALTORS®

Author: 2021 CAR Global Real Estate Council Member Don Pasek | Omniterra Real Properties, Inc.

Foreign investors traditionally have embraced the United States as a safe harbor for capital in the face of political and social upheaval in other parts of the world. In addition, the U.S. dollar has long been a currency of reserve for those who wish to protect themselves against international currency fluctuations. An investment in U.S. real property has been a preferred vehicle to maintain this hedge and simultaneously realize increases in equity and liquidity.

Over the past several years, though, U.S. policy on immigration has changed the country’s policy toward foreigners who locate here temporarily or permanently in pursuit of familial and personal economic stability. These changes directly affect the ability of foreigners to investigate and evaluate potential investments. Foreigners who arrive on a “B” visa, intended for visitors remaining for a short period of time, have always been allowed to purchase property for personal or business use without restrictions. The COVID-19 pandemic, however, has resulted in restrictions on temporary legal entry to the United States by foreigners. Only a successful vaccine or other durable solution will remedy this.

Since 2017, the U.S. government has reduced legal immigration by about 50%. Legal immigration, which entitles the visa holder to work, is the largest source of population growth in the U.S., which in turn is a driver of real estate demand. Also, some significant changes have been made to the EB-5 investor program, which, since 1990, has allowed persons who commit a certain amount of capital to apply for citizenship for themselves and their immediate relatives. In November of 2019, the minimum qualifying investment was raised from $500,000 to $900,000. This may significantly reduce the potential number of investors for the program. Only time will tell whether all of these changes have had significant effects on direct foreign investment in real estate in the U.S. The incoming administration has promised to welcome immigrants and create a new policy that increases the number of new citizens while easing the ability of foreigners to join the American populace, which may reverse any negative effects the changes of the past few years have wrought.

Overall, the United States remains an excellent place for foreigners to place capital, despite immigration restrictions. In comparison to many developed economies, the United States has few restrictions on foreign investment in real estate and great potential for profit. In Illinois specifically, compared to other states, the price of a single-family home, at just over $200,000 on average, is affordable, providing a fertile ground for investors to create a profitable rental portfolio.