A new Texas law restricts people in designated countries from buying real estate in the Lone Star State.
Texas Gov. Greg Abbott signed Senate Bill 17 in June, and it took effect Sept. 1.
"It is very simple," Abbott said in a statement. "Hostile foreign adversaries like China, Russia, Iran and North Korea, as well as foreign terrorist organizations like Tren de Aragua, must not be allowed to own land in Texas. They should not be allowed access to our critical infrastructure, and they may not be allowed to exploit our border."
The law, already facing at least one legal challenge, could have implications in one of the most popular states for foreign property buyers, observers say.
The broadly written bill also limits leases signed by people who live in those countries to one year or less and could even apply to licenses and life estates, according to Ted Chiappari, a partner at law firm Duane Morris in New York.
Under the law, those in the United States on a temporary visa from one of the designated countries can buy only a single homesteaded property, Chiappari said. The law doesn't apply to someone who has established permanent legal residence in the United States, he noted.
"It's definitely a splash of cold water on foreign investment in Texas," Chiappari told Homes.com.
In 2023, Florida passed an "alien land law" that restricts certain foreign purchases of specific types of property in the state. Other states, including Indiana, Nebraska and Virginia, are considering similar bills, according to the nonprofit Chinese American Legal Defense Alliance, or CALDA.
Texas top destination for foreigners
The Lone Star State ranks among the five most popular U.S. destinations for international homebuyers, behind only Florida and California, according to a study this summer from the National Association of Realtors.
"Anytime legislation restricts who can buy, sell, or lease property, it impacts our members, their clients, and the overall health of the housing market," the Houston Association of Realtors said in a statement in response to the law.
It will add more paperwork to already cumbersome real estate closing process, according to Ken Johnson, the Walker Family Chair of Real Estate at the University of Mississippi.
"While it makes little sense, the impact on prices and marketing times should be negligible," Johnson said in an email to Homes.com.
In July, CALDA filed a federal lawsuit challenging the bill on behalf of three plaintiffs. The group is appealing a judge's August ruling dismissing the case for lack of standing.
"We are standing up for not only these three plaintiffs, but for every Chinese American who deserves equal protection and basic dignity in the United States," said Justin Sadowsky, lead counsel for the case, in the statement. "This discriminatory law violates fundamental constitutional principles and perpetuates harmful stereotypes that have no place in modern America."
The law defines a designated country as one identified by the U.S. director of national intelligence as posing a national security risk, according to Duane Morris. Affected people include foreign nationals who are domiciled in a designated country; foreign nationals who only hold citizenship in the designated country; and individuals who are agents of the designated country or members of its ruling party, the firm said.
Civil penalties include $250,000 or 50% of the market value of the property in question, whichever is greater, according to Duane Morris. Violators also could face felony charges and jail time, the firm said.