State Legislation on Foreign Real Estate Ownership: A Rising Wave of Restrictions

Amid growing national security and geopolitical concerns, there has been a significant shift in the United States regarding the foreign ownership of real estate. This change is highlighted by the evolution of state laws in Alabama, Florida, Idaho, North Dakota, Ohio, and Tennessee, which have begun to implement restrictions targeting foreign investments in land. This report provides a comprehensive overview of the emerging legislative landscape.

Federal Oversight and State Responses

The Committee on Foreign Investment in the United States (CFIUS) gained expanded authority in 2018 to scrutinize specific real estate transactions involving foreign investors. Despite this federal oversight, a pivotal 2022 CFIUS decision regarding the Fufeng Group’s acquisition near a North Dakota military site revealed limitations in its jurisdiction, sparking a nationwide reassessment of foreign land ownership policies.

State Legislation: Diverse Approaches and Implications

The response from state legislatures has varied significantly:

  • Disclosure and Studies: Some states have opted for regulatory measures that require disclosure of foreign ownership or mandate comprehensive studies to understand the extent and impact of such investments.
  • Prohibitive Measures: Other states have taken more stringent approaches, such as outright prohibitions on certain transactions or requiring the divestiture of properties owned by foreign entities.
  • Targeted Restrictions: The laws often specifically address types of land considered sensitive, such as agricultural areas or parcels near key infrastructure and military sites.

Analysis of Specific State Laws

Each state has tailored its legislation to reflect local concerns and strategic interests:

  • Alabama and Tennessee focus on agricultural land, reflecting their significant rural economies.
  • Florida and Ohio, with diverse urban and agricultural landscapes, have implemented broader restrictions that encompass various property types.
  • Idaho and North Dakota have responded directly to potential threats near military installations and critical infrastructure.

Legislative Motivations and Challenges

The primary motivation behind these legislative actions is to safeguard national security and maintain control over vital resources. However, these laws also raise questions about market openness and the balance between protecting national interests and encouraging foreign investment. The complexity of these issues ensures ongoing debates and legal challenges.

As the landscape of foreign investment in U.S. real estate continues to evolve, it is clear that state legislatures will play a pivotal role in shaping the boundaries of foreign ownership. The impact of these laws will likely resonate well beyond the states involved, influencing national policy and international economic relations.