Florida law limiting foreign real estate investors ‘borders on redlining’

Certain foreign nationals will find it harder to purchase a home or land in Florida after a new state law went into effect this month, a move that experts worry could set a discriminatory precedent.

The bill signed by Gov. Ron DeSantis in May bans citizens from Cuba, Venezuela, Iran, Russia, China, North Korea and Syria from purchasing agricultural land in the state. It would also restrict foreigners from those countries from buying real estate within 20 miles of airports, US military installations, or other so-called “critical” infrastructure facilities.

Chinese citizens who buy land in restricted zones would face the harshest penalties versus other groups.

The law threatens to violate the Constitution and the Fair Housing Act, civil liberty and real estate experts said, the latter of which protects homebuyers from being discriminated against based on race or national origin. There are also many unknowns surrounding its implementation.

The law is “too broad,” Luis Padilla, CEO of Oceanside Realty & Investment Inc./ Padilla Team in Florida, told Yahoo Finance.

“In my opinion it’s more of a political statement versus a real estate play. To say citizens from certain countries can’t purchase within 20 miles of an airport, I think it’s a little bit beyond the real estate practitioner’s pay grade to really be playing national security agents,” Padilla added. “As a realtor, I think it’s a law that hurts and borders on redlining citizens just because of their ethnicity or citizenship. If I have to be on one side, I’m not for it.”

Chinese immigrants sue

A real estate brokerage that primarily serves clients of Chinese descent, as well as a group of Chinese citizens who reside in Florida, are filing a lawsuit against the new property law.

The plaintiffs are represented by the American Civil Liberties Union, ACLU of Florida, DeHeng Law Offices PC, and the Asian American Legal Defense and Education Fund, in coordination with the Chinese American Legal Defense Alliance.

According to the ACLU, the new law “recalls similar efforts over the past century to weaponize false claims of national security” against Asian immigrants and other marginalized communities. Advocates further noted that politicians across the US used similar tactics to pass “alien land laws” in the early 1900s, which barred Chinese and Japanese immigrants from becoming landowners.

The policies worsened violence and discrimination against Asian communities in the US, the ACLU wrote in a statement. These laws have since been repealed by state legislatures because they violated the Constitution’s equal protection guarantees.

According to DeSantis, however, this new law continues his commitment to “crack down on Communist China” as he says it poses a “great geopolitical threat.”

Commissioner Wilton Simpson added that the new law — which would ban certain foreign nationals from purchasing agricultural land — would “ensure Floridians have access to safe, affordable, and abundant food supply.”

In Florida, foreign citizens own 6.3% of all private agricultural land, according to an analysis of the bill. Florida’s House of Representatives also noted the bill would have a significant impact on property ownership because it would allow the state to “seize and sell illegally-owned property.”

The law would “codify and expand housing discrimination against people of Asian descent in violation of the Constitution and the Fair Housing Act,” ACLU of Florida said in a news release. “It will also cast an undue burden of suspicion on anyone seeking to buy property whose name sounds remotely Asian, Russian, Iranian, Cuban, Venezuelan, or Syrian.”

Major loss from investors

The law could also slow real estate investment in the state.

Chinese investors bought $6.1 billion worth of real estate property in the US between April 2021 and April 2022, according to the National Association of Realtors (NAR). And overall, Florida was the top destination for foreign buyers, accounting for 24% of all international purchases, NAR found.

Other top destinations for foreign buyers included California, Texas, Arizona, New York, and North Carolina, the analysis revealed.

Under the law, which went into effect July 1, those who purchased or are looking to purchase in certain zones could face severe penalties or fines. According to the bill, Chinese people who purchase property in restricted areas could face felony charges, whereas those from other nations could face a misdemeanor penalty for buyers and sellers.

Those who already own property in restricted areas also must register with the state or face fines of up to $1,000 per day. If owners don’t comply, their property or land could be seized, lawmakers said.

“The new law (SB 264) still has elements of it that have yet to be determined,” Marla Martin, senior media relations and communications manager for Florida Realtors, told Yahoo Finance. “The Florida Real Estate Commission (FREC), Department of Agriculture and Consumer Services (DACS), and the Department of Economic Opportunity (DEO) are required to implement specific portions of the bill.”

For instance, FREC is charged with creating an affidavit the buyer must sign that says the buyer complies with the requirements of the new law. But FREC’s affidavit isn’t ready yet, Florida Realtors said.

“Until FREC creates an affidavit for statewide use, buyers should expect to sign an affidavit provided by their closing agent,” the group said.

Also not available is an easy way to determine if a property is subject to the law. There is no official list or map of military installations or other way to figure out if a property is near critical infrastructure, Florida Realtors said.

“So much is still unknown currently,” Marin said, “any comments would be speculative.”

Gabriella Cruz-Martinez is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.

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