Editor’s note: The threat posed by the Chinese Communist Party through Chinese entities purchasing real estate in the U.S. is real, especially when property is located next to critical infrastructure or military installations. Enacting prohibitions on real estate sales to foreign adversaries is long overdue. The reforms now being contemplated in Congress and in state houses nationwide are attempts to keep pace with growing threats from China and other malign actors. Properly calibrated, such tools can address those threats while protecting the private property rights that underlie U.S. vitality.
What follows is a lightly edited excerpt from the new Heritage Foundation report by Bryan Burack, “China’s Land Grab: The Sale of U.S. Real Estate to Foreign Adversaries Threatens National Security,” which was released on Thursday. The full report can be read here. (Heritage founded The Daily Signal in 2014.)
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At both the federal and state levels, elected leaders are paying more attention to national security threats stemming from Chinese-owned real estate in the United States.
The totality of Chinese-owned real estate in the United States remains unknown and, under current law, is unknowable. For agricultural land, Chinese-owned acreage reportedly only constitutes a small share of the United States’ total, but has increased rapidly in recent years, suggesting a growing threat that would best be managed now before it turns into a significant problem.
To date, media coverage and government scrutiny have focused on certain forms and instances of Chinese real estate purchases, due to the national security implications of specific transactions and properties. At the federal level, numerous proposals have been introduced in the U.S. Congress to enhance the government’s ability to address national security threats stemming from Chinese real estate acquisitions. In addition, at the state level, legislators in multiple states are seeking to expand existing restrictions or establish new ones based on similar concerns.
As China and the U.S. sink deeper into a New Cold War, national security threats associated with these real estate interests are growing and coming into sharper focus.
Protecting the nation from these threats requires an effective response from federal national security agencies as well as state governments. It is imperative that state and federal lawmakers ensure that they have the capability to monitor, review, and, when necessary, prohibit transactions in U.S. farmland and other real estate that pose a national security threat.
China’s Total US Land Holdings Remain Unknown
While U.S. officials most frequently cite Chinese ownership of agricultural land as a threat, national security concerns may arise from a much broader scope of Chinese involvement in U.S. real estate. For example, Chinese ownership of any real estate may be a concern if it is near critical infrastructure, whether or not it is agricultural land. Adding further complexity, national security concerns may be present even in non-ownership interests in real estate—for example, if a Chinese tech company leases office space across the street from the Pentagon or acquires an easement to build wind turbines near a military base.
The United States currently has no system for broadly monitoring Chinese ownership of U.S. real estate. Ownership of real estate is overseen by state and local governments, and even if the federal government did institute a system to collect such data, the United States’ friendliness toward shell companies would render any results incomplete at best.
Non-ownership interests, such as leases, easements, licenses, and rights to water or subsurface minerals, may be even harder to discern.
Some clues can be gleaned from Chinese foreign direct investment in the United States. Although inbound foreign direct investment from China has declined precipitously from its high of $46 billion in 2016, Chinese entities still spent nearly $700 million acquiring U.S. companies in 2021.
Given that Chinese companies have spent well over $100 billion acquiring U.S. companies since 2010, many of which will have owned real estate holdings, it seems certain that Chinese companies control significant amounts of U.S. real estate. The National Association of Realtors, for example, reported that during 2020, “Chinese buyers were the top foreign buyers of U.S. commercial real estate.”
The United States currently has no system for broadly monitoring Chinese ownership of U.S. real estate.
In theory, many of these transactions would be subject to national security review by the Committee on Foreign Investment in the United States. The committee can review transactions in specific types of real estate, as well as some acquisitions of and investments in U.S. companies that can hold real estate—assuming that the parties obey their legal obligations to disclose the transaction.
In multiple high-profile cases discussed below, however, the committee has failed to address, or has even approved, transactions in real estate with clear national security concerns, forcing state and local governments to apply their own restrictions. The Committee on Foreign Investment’s track record indicates both a failure to appropriately enforce existing authorities and that shortcomings in those authorities have hindered it from taking critical national security actions.
Given this track record, it seems unlikely that existing committee authorities generate sufficient visibility into Chinese real estate interests in the United States.
Read the rest of the report here.