Texas foreign buyer law rattles real estate brokers, investors

A new Texas law targeting land purchases by foreign nationals from China, Iran, North Korea and Russia is chilling real estate investment ahead of its September implementation, industry pros say. The vague language in the legislation has brokers and attorneys scrambling for clarity.

Senate Bill 17, signed into law by Gov. Greg Abbott in June, will ban the purchase of real estate — including residential, commercial, industrial and agricultural — by entities tied to those four countries starting Sept. 1. It also prohibits related property interests such as leases longer than one year, easements and mineral rights. Permanent U.S. residents are exempt, but enforcement details are scarce.

Some Texas brokers say the law is already driving deals off the table, the Houston Business Journal reported. Sam Chang, a partner at Henry S. Miller in Houston, said two Chinese clients abandoned potential commercial investments after SB 17 passed. Others are seeking guidance from lawyers, unsure how far the restrictions extend or how to verify compliance.

“How does this all work, and who is policing all this?” Chang said.

The law authorizes the state attorney general to define enforcement protocols, but until regulations are issued, attorneys say the uncertainty could chill foreign capital. 

Land-use attorney Jenny Roan Forgey of Jackson Walker said clients are calling confused, asking whether minority investors in international firms could trigger violations. Penalties range from fines of up to $250,000 to potential jail time for individuals.

Critics, including Texas state Rep. Gene Wu of Houston, argue the law invites racial profiling and could be unconstitutional. Wu fears people will avoid selling to “anyone who has an Asian face,” he said. Wu pointed to a similar Florida law barring Chinese citizens from owning homes or land as a possible model for legal challenges. SB 17 was based on that law, which is currently blocked by a federal court.

The Texas law does not apply retroactively. But experts say confusion about its scope could already be affecting investment activity. 

“This is commercial real estate,” Chang told the outlet. “These aren’t small investments.”

— Judah Duke