Letting Chinese Nationals Buy Real Estate is a Human Rights Issue

Texas governor Greg Abbott recently announced that he would seek legislation banning Chinese investors from buying real estate in the state. Back in 2021, he signed into law the Lone Star Infrastructure Protection Act that prevented business entities associated with “hostile nations” from buying land near (or tied to) critical infrastructure. This was in response to a Chinese billionaire who bought a large land estate in order to build a wind farm. Other governors, such as Florida’s Ron DeSantis, are considering similar bans that would extend to non-residents from China. 

This trend extends to other countries as well, since the left-leaning federal government of Canada has recently announced that it will prohibit foreign nationals who are not legal residents from purchasing residential real estate in Canada. Residents who have been in Canada for less than two years will also be prohibited from doing so. The proposal is drafted without reference to any ethnic group, but the reality is that it is largely targeted at Chinese nationals. Even municipal governments are chiming in. In 2016, the city of Vancouver slapped a 15 percent tax on foreign homebuyers. While the Chinese were not named in the legislation, it was clear in political debates that they were the target. The mayor of Atlanta is considering the same type of restrictions

The common denominator of these policy proposals is not ideology, as both left-wing and right-wing governments have advanced them. Rather, it is the claim that Chinese buyers are increasing the demand for real estate and housing in some key urban markets (Los Angeles, Vancouver, Toronto, Atlanta, Boston, New York). Restricting this foreign demand, some believe, will relieve upward pressures on rents and prices for new houses.  Sure, there is some wrapping of national security around the proposals, but the core intent is to cater to urban voters who seem to be concerned with rising rents in large cities. 

There are two strong reasons to resist these xenophobic – for there is no better term – policy proposals. The first is that the pressure on housing prices has little to do with rising demand; it has to do with inelastic supply. The cities where the backlash against foreign buyers of real estate is strongest are generally known for restrictive zoning policies, land-use regulations, construction regulations, and building codes that make it nearly impossible to add housing units. This makes the supply of housing highly inelastic.

The more inelastic the supply, the greater the price increase when demand shifts up. This means that the root cause of the rising rents and house prices is bad housing policy that restricts the supply side. The effect of some additional Chinese buyers is trivial in comparison to the noxious effects of these supply-restricting measures. 

There is another reason, however, to resist this proposal. A far more important one, in moral terms. The ban makes it easier for the Chinese government to abuse its citizens.

The Chinese government frequently seizes the assets of dissidents, disgraced members of government, and important businesspeople. This strips them, and their families, of any wealth they might possess. Sometimes, as in the case of outright corruption, asset seizure seems warranted. Charges of corruption, however, are sometimes levied simply for political expediency. Sometimes, such as with the riots in July 2022, assets are seized or frozen for undisclosed reasons. More often than not, it is used as a punishment against entrepreneurs, dissidents, and critics of the regime.

The powers to seize assets are also growing. In the midst of the COVID pandemic, for example, the Chinese government gave President Xi Jinping powers to seize assets from organizations that complied with foreign sanctions against China.

For Chinese nationals, buying real estate abroad is a way to protect part of their wealth by placing it beyond the reach of the Chinese government. If they manage to escape China, targeted individuals have a safety cushion on which to rely once they arrive in western countries. This not only protects them from the predations of the Chinese Communist Party, it probably also limits the possible extent of these predations. Had the Chinese government full control of the capital assets of its nationals, it would be better able to capture resources that could be used to equip the military that is conducting threatening moves against Taiwan, or in implementing genocidal policies against Uyghurs in western China. The inability to seize some of the wealth of a small minority of Chinese people makes the world a slightly better place than it otherwise would be.

For years now, politicians all over the political spectrum have engaged in vacuous displays of virtue signaling on the topic of human rights. I say “vacuous” and “virtue signaling” with cause. Indeed, by engaging in gratuitous and counterproductive anti-Chinese policy, they have shown that their commitment to human rights is paper thin. If they really cared, they’d realize that they are helping one of the world’s most abusive governments to tighten its grip on power. Even worse, maybe they are aware, and they simply refuse to act on their professed principles.