A rule in Florida that limits foreign investors in real estate ‘borders on redlining.’
Because of a new state law that went into effect this month, it will be harder for some foreigners to buy a home or piece of land in Florida. Experts worry that this could set a bad example for discrimination.
Governor Ron DeSantis signed a bill in May that makes it illegal for people from Cuba, Venezuela, Iran, Russia, China, North Korea, and Syria to buy farmland in the state. It would also make it hard for people from these countries to buy property within 20 miles of airports, US military bases, or other “critical” assets.
If a Chinese person bought land in a limited zone, they would be severely punished.
Civil liberty and real estate experts said the law could go against the Constitution and the Fair Housing Act. The Fair Housing Act protects renters from being treated unfairly because of their race or nationality. There are also a lot of unknowns about how it will be used.
In an interview with Yahoo Finance, the law is “too broad,” said Luis Padilla, CEO of Oceanside Realty & Investment Inc./Padilla Team in Florida.
“It seems more like a political statement than a real estate play. “For a real estate agent to say that people from certain countries can’t buy within 20 miles of an airport, I think it’s a little bit above their pay grade to act as national security agents,” Padilla said. “As a real estate agent, I think it’s a bad rule that hurts people and comes close to discriminating against them because of their race or citizenship. I’m not for it if I have to pick a side.”
The rule could also stop people from putting money into real estate in the state.
The National Association of Realtors (NAR) says Chinese buyers bought $6.1 billion of real estate in the US between April 2021 and April 2022. Overall, NAR found that 24% of all overseas purchases were made in Florida, the top state for foreign buyers.
The study also showed that California, Texas, Arizona, New York, and North Carolina were popular with foreign buyers.
Under the law, which was enacted on July 1, people who buy or try to buy in certain zones could be fined or punished harshly. According to the bill, Chinese people who buy property in restricted places could be charged with a felony, while people from other countries could be charged with a misdemeanour.
People who already own land in restricted areas must also register with the state or face fines of up to $1,000 daily. Lawmakers said that if owners don’t follow the rules, their property or land could be removed.
Marla Martin, the senior media relations and communications manager for Florida Realtors, told Yahoo Finance that some parts of the new law (SB 264) are still up in the air. “Parts of the bill must be put into place by the Florida Real Estate Commission (FREC), the Department of Agriculture and Consumer Services (DACS), and the Department of Economic Opportunity (DEO).”
For example, FREC makes a statement that the buyer must sign to say that he or she is following the new law. But Florida Realtors said that the statement from FREC isn’t ready yet.
“Until FREC makes an affidavit that can be used all over the state, buyers should expect their closing agent to give them an affidavit to sign,” the group said.
There is also no easy way to tell if a piece of property is subject to the law. Florida Realtors say there is no official list, map of military bases, or any other way to determine if a property is near important infrastructure.
“There is still so much we don’t know,” Marin said. “Anything I say would be a guess.”