Desperate times call for desperate measures. That is the argument that Charles Schumer (D., N.Y.) and Mike Lee (R., Utah) are making in the wake of the housing crisis and beleaguered housing market. The remedy: the Visa Improvements to Stimulate International Tourism to the United States of America Act or the VISIT USA Act. Schumer stated in a press release, “This concept has the potential to lift demand for the nation’s excess homes. Our housing market will never begin a true recovery as long as our housing stock so greatly exceeds demand.”
The VISIT USA Act would incentivize foreign buyers by providing them with the following:
- Provide a three-year renewable residential visa for foreign nationals investing at least $500,000 in residential real estate in the United States ($250,000 of the total spent on a primary residence that the owner would be required to reside in for at least 180 days);
- Provide Chinese tourists access to 5-year multiple-entry visitor visas;
- Permit the Secretary of State to conduct a videoconferencing program as a method for screening foreigners, thereby streamlining the application process;
- Speed up State Department Visa proceedings for priority applicants by offering a fee-based “expedite” option, and expedited clearance for pre-approved, low-risk travelers upon arrival in the US;
- Provide a “Canadian Retiree Visa” that would allow Canadians meeting specific criteria to have a visa lasting 240 days (renewable every three years)
So what does this all mean for the Boston and Cambridge real estate markets? Well, the bill is currently under review in the judiciary committee, so it still has to go through the legislative pipeline before being written into law.
Let us assume that VISIT USA does pass and get written into law. What then? The National Association of Realtors 2011 Profile of International Home Buying Activity highlights colleges and universities as a potent motivator in persuading foreign home buyers:
“Many U.S. colleges and universities have significant numbers of international students. Some families are reported as purchasing U.S. properties in college areas—sometimes based on the combined resources of a number of family members. The student(s) then use the property as a residence while studying in the country. In addition, the properties can also acquire rental and investment aspects, with the student(s) functioning in a landlord capacity with other students.” http://www.realtor.org/research/research/international_home_buying#ProfileofInternationalHomeBuyingActivity2011
According to statistics released by Harvard, 16% of its undergraduate student body is “international.” The percentage of foreign students in Harvard Business School and the Graduate School of Arts and Sciences is 14% and 33%, respectively. (http://www.hio.harvard.edu/abouthio/statistics/studentstatistics/academicyear2011-2012/). Though only 10% of MIT’s student body is of international origin, student in graduate level programs compose a staggering 38% of the student body (http://web.mit.edu/iso/stats_11-12/general.shtml). Across the river, Boston University’s student body is 7% international with enrollment of foreign students at an all time high (http://www.bu.edu/isso/about/statistics/student/2009/summary.html). These numbers are trending upwards, so expect to see increased demand from foreign buyers, especially if VISIT USA passes.
Susan Wachter, a Professor of Real Estate and Finance at University of Pennsylvania’s Wharton School said in an interview on NPR’s “On Point” with Tom Ashbrook that poised foreign buyers will invest in the US, because the US real estate market is “affordable always relative to other countries.”
“We don’t appreciate how affordable housing is relative to our peers, and even in countries like China housing is more expensive, and now America is on sale. We are more affordable than ever,” (http://onpoint.wbur.org/2011/10/25/foreign-buyers) Wachter said in the “On Point” interview.
With this confluence of factors investors and laypeople alike can expect the Boston-Cambridge real estate markets to witness increase in demand resulting from the easing of restrictions for foreign buyers.
Michael Breer works in the Boston and Cambridge real estate markets for Gibson Sotheby’s International Realty. He can be reached at firstname.lastname@example.org.