Two U.S. senators, Mike Lee, R-Utah, and Charles Schumer, D-N.Y., have reached across the aisle to come up with a way to solve the U.S. housing crisis: sell more homes to rich foreigners, especially Canadians Snowbirds and wealthy Chinese.
“Many people want to come and live in the United States,” said Sen. Charles Schumer (D-N.Y.), who introduced the legislation Thursday along with Sen. Mike Lee (R-Utah). “They will be here spending money and paying taxes, and the most important thing is they’ll sop up the extra supply of homes we have right now compared to demand, and that’s what’s dragging our economy down.”
Here’s the plan: Foreigners would use cash to purchase at least $500,000 of U.S. residential real estate (no mortgages). At least $250,000 must go to a primary residence and the remainder could be invested in other residential real estate.
In return, they’d get a visa letting them stay in the country for 240 days a year, up from the current 180 days. This home purchaser visa requires that the foreign national spend at least half the year in the U.S. and pay taxes including on all foreign earnings, but would NOT allow any work privileges or access to any major U.S. government benefits, like Medicaid, Medicare, or Social Security. It does not provide a path to citizenship or any privilege in obtaining a work visa. The home purchaser visa would allow spouses and minor children to enter the U.S. on the same conditions as the home purchaser.
And if they sell the real estate, they lose the visa.
A recent Deseret News editorial supports this legislation. The editorial states in part, it is clear that the big winners in this “creative” legislation, if passed, will be well-heeled Canadian retirees who are looking for real estate bargains in the badly busted real estate markets of the Sun Belt.
So who could realistically take advantage of an arrangement to purchase a home and spend over half the year in the U.S. without working? If past is prologue, the editorial continues, then it is Canadians, who, with a pretty decent economy and a strong exchange rate, already account for one quarter of foreign homebuyers in the U.S.
Wealthy Chinese might also take advantage of this opportunity. And the bill seems to contemplate this as well by making it easier for Chinese nationals to qualify for five-year, multiple-entry visitor visa (currently Chinese nationals must apply for a new visa every year), according to the editorial.
The Deseret News editorial concludes by stating: Of course, the real winners are current investors in sagging real estate markets. Although the home purchaser visa is no panacea for the ailing U.S. housing market, it may be a spur to lagging sales.
Foreigners pumped $82 billion into residential real estate markets in the U.S. last year (up from $66 billion in the previous year). Last year foreign buyers accounted for about one in 20 purchasers in markets like Miami and Phoenix.
Panacea or Tax Grab
Let’s see how this really works: For an additional 60 days a year in the U.S., I allow the IRS to tax my Canada Pension Plan, Old Age Security, and any other sources of income from pensions or investments I’ve managed to scrape together. Gosh, I can hardly wait.
Maybe the plan will work with the Chinese. I suspect life in California looks better than life in Beijing—especially if it means you can get some of your money out of China.
But it’s hard to imagine many Canadian snowbirds buying in. Thanks to the property bust, you can buy some extremely nice property in the U.S. for much less than the $500,000 minimum stipulated by the senators’ plan.
Would you surrender yourself to the IRS for an extra two months in the Sun Belt. It’s really not that cold in Canada during April and May.
A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort.