Chinese buyers, who were once the top foreign purchasers of U.S. residential real estate, are facing potential obstacles as several states across the country contemplate or enact legislation to limit or ban their property acquisitions. While the move aims to safeguard national security interests against "foreign adversaries," critics argue that such measures could hinder homebuying for Chinese citizens and potentially fuel discrimination.

Chinese buyers made headlines last year by spending $6.1 billion on existing U.S. homes, surpassing other international homebuyers. They accounted for nearly 14% of all buyers on average from 2015 to 2020, as reported by the National Association of Realtors. However, pandemic-related travel restrictions caused their share to dip to 6% in the last two years. Despite the decrease, their average purchase price surged to a record-breaking $1 million in 2020.

In Florida, Governor Ron DeSantis recently signed a bill prohibiting most non-U.S. citizens or permanent residents of Chinese nationality from owning property in the state. Similar restrictions apply to individuals from six other nationalities. The law, slated to take effect on July 1, includes exemptions for those with asylum and non-tourist visas. Montana's Governor, Greg Gianforte, also signed a bill in May prohibiting land sales or leases to entities from designated foreign adversaries, including China.

Other states, including Texas, Alabama, and Louisiana, have contemplated similar measures to varying extents. Some states have additionally targeted farmland acquisitions by "foreign adversaries." However, opponents argue that these bills evoke xenophobic alien land laws from the past and are discriminatory in nature. In fact, a group of Chinese citizens residing in Florida filed a lawsuit in May, challenging the constitutionality of the new law. Legal experts warn that implementation resulting in discrimination could face scrutiny under the Fair Housing Act.

The repercussions of the Florida law are already evident, with reports of a "chilling effect" on Chinese buyers. Concerns about the legislation's implications have led some Chinese buyers to contemplate selling their properties. Traditionally, Chinese buyers have viewed U.S. residential properties as investments, but recent trends indicate a shift towards purchasing homes for personal use.

Chinese buyers are also diversifying their interests beyond the traditional hotspots of New York and Los Angeles. Southern markets like Miami, Houston, and Austin are witnessing increased interest, as Chinese buyers seek more affordable real estate options. This shift is driven by a growing number of middle-class families looking to relocate abroad.

While two House Democrats introduced a bill to counter state legislation targeting property purchases based on citizenship, the path forward remains uncertain. Experts anticipate that more states may follow the lead of Florida and Texas in their efforts to limit Chinese homebuying, despite potential legal challenges and backlash. As the debate surrounding these measures continues, concerns persist about striking a balance between national security interests and avoiding discriminatory practices.