From 2009 to 2019, foreign ownership of US land doubled. According to the Department of Agriculture (USDA), foreign entities now hold millions of acres of U.S. agricultural land. Countries like China, Canada, and Germany are leading the charge, with Chinese entities particularly active in recent years.
Foreign investors are drawn to the stability and potential for high returns offered by the U.S. market. They invest in agricultural land, commercial properties, and residential real estate. In 2022 alone, foreign investment accounted for nearly 10% of all U.S. real estate transactions, highlighting its growing importance.
Impact of Foreign Investment on the U.S. Real Estate Market
Foreign investment in U.S. land has both positive and negative effects. On the national level, it brings in capital, which can stimulate economic growth and create jobs. However, it can also increase property prices, making it harder for local buyers to compete.
At the local level, the impact varies. In some regions, foreign investment drives up property values, benefiting local economies. In others, it can lead to concerns about land being taken out of production or used for purposes that may not align with local needs and traditions. Investors should carefully consider these factors when entering the market.
Legal and Regulatory Landscape for Foreign Buyers
The legal and regulatory environment for foreign buyers in the U.S. is complex and constantly evolving. The USDA monitors foreign land holdings, while other agencies, like the Department of Homeland Security, assess the national security implications of foreign acquisitions.
Recent policy changes have made it more challenging for foreign entities to purchase U.S. land. Enhanced scrutiny and reporting requirements aim to protect national security and ensure transparency. Real estate investors must stay informed about these regulations to avoid legal pitfalls and make strategic decisions.
What Threats Do Foreign Acquisitions of U.S. Land Pose?
The most significant concerns involve potential threats to U.S. defense and food security. This is primarily because Chinese entities have been purchasing large tracts of farmland, some of it near sensitive sites. For example, in 2021, a Chinese company (Fufeng Group) bought land just 1.2 miles from an Air Force base in Grand Forks, ND, sparking panic among lawmakers nationwide.
Another concern is that foreign land-grabbing can affect local land rights and agricultural production, which could put local food security at risk. This has spurred more concern among policymakers regarding foreign control of the U.S. food supply. Thankfully, these acquisitions do not yet represent a substantial enough portion of food production in the U.S. to threaten national food security.
What Solutions Are Being Discussed?
The only federal law currently governing these purchases is the Agricultural Foreign Investment Disclosure Act of 1978, which requires that any foreign entity that holds an interest in U.S. agricultural land must disclose any transactions and holdings to the Secretary of Agriculture within 90 days. Failure to report results in steep penalties (up to 25% of the fair market value for their land), but this is rarely enforced due to ‘staffing shortages.’ There are also regulations on the state level, but these vary.
Following the supply chain disruptions from the COVID-19 pandemic and escalating tensions with China, U.S. lawmakers have increased scrutiny of purchases by Chinese investors. In a recent spending bill (H.R.4356), the House Appropriations Committee included an amendment that prohibits the purchase of U.S. land by Chinese-owned companies. However, land purchasing falls under the state’s rights, so the USDA does have the constitutional authority to interfere in private land deals.
Where are Chinese Entities purchasing land?
In addition to the Fufeng Group’s purchase of land in North Dakota, other Chinese entities have purchased U.S. farmland across the country. More than 80% of the Chinese-owned land in the US is held by Smithfield Foods, and a billionaire named Sun Guangxin.
Smithfield Foods has recently purchased land in Virginia, Missouri, and North Carolina. Smithfield Foods currently owns approximately 128,000 acres of U.S. farmland. Since 2016, a company owned by Sun Guangzin has spent an estimated $110 million on land located in Val Verde County, Texas. Val Verde is home to the Laughlin Air Force Base. Guangzin’s ties to the Chinese Communist Party drew the attention of local and national politicians.
Future Outlook on Foreign Land Purchases and Homeland Security
The future of foreign land purchases in the U.S. appears dynamic and uncertain. On one hand, global interest in U.S. real estate is likely to remain strong, driven by economic opportunities and market stability. On the other hand, increasing regulatory scrutiny and geopolitical tensions may pose challenges for foreign investors.
For homeland security, the focus will likely remain on balancing economic benefits with safeguarding national interests. Policies will continue to evolve to address emerging threats and ensure transparency in foreign acquisitions.
Key Areas of Interest for Chinese Entities
Chinese entities have been particularly active in purchasing U.S. land, focusing on agricultural and commercial properties. States like Texas, California, and Missouri have seen significant investments from Chinese buyers. These acquisitions are often driven by a desire to secure food supplies, diversify investment portfolios, and gain strategic advantages.
Investors should monitor these trends to understand the competitive landscape and identify opportunities. Being aware of where foreign entities are investing can help identify emerging markets and potential risks.
Using LandGate’s LandApp nationwide ownership information tool, you can search for land by owner or organization name. Below is a search for the Fufeng Group provided the exact location of their parcels:
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