Buy a House, Get a Visa (2)

by on March 22, 2009 at 7:40 am in Economics | Permalink

The buy a house, get a visa program which I have been pushing for some time is getting some serious play.  Writing in the WSJ, Richard Lefrak and Gary Shilling note:

The blueprint for a program to sell surplus housing to immigrants is already in place with the EB-5 visa program. Each year, 10,000 EB-5 visas for this country are available for foreigners who each invest $1 million in a new enterprise ($500,000 in economically depressed areas) that creates at least 10 full-time jobs. After two years, the entrepreneur and his family can become permanent residents.

Why not reduce the investment required and expand the program to 100,000?  

Barry Ritholz John Mauldin has further thoughts and links.  Thanks to Jim Ward for the pointer.

Andrew March 22, 2009 at 8:01 am

The no free lunch department requests an accounting of the downsides. (Other than the “foreigners suck our jobs away” argument which is a known issue.)

Zack March 22, 2009 at 10:57 am

In the last 10 years the average the average number of people utilizing the EB-5 visa is less than 800 per year.

Jim March 22, 2009 at 11:30 am

This is an interesting idea.

But what about starting new programs? Like: 1) Individuals who owe backtaxes get a pass if they buy a foreclosed home; 2) nature conservancies can get a matching grant from the government if that non-profit turns swaths of depressed/ghost-towns into nature preserves; 3) people in depressed areas are paid to moved to high-growth areas; etc.

Honestly, those would do better than expanding the EB-5 program.

Possibly some of the reasons why foreign capitalists are not applying to this program is droves are: 1) the US is not THAT desirable to rich foreigners; 2) rich foreigners do not see an economic advantage coming to the US or gaining US citizenship (which one might believe cause sneaking around taxes in Spain, Italy, Turkey, Laos, etc. is easier than in the US); 3) once rich foreigners become rich Americans their assets and earned income anywhere in the world are taxable by the IRS & due to new-ish agreements with secret banking states (the Swiss, Luxembourg, etc) offshore accounts are now easier to identify; and 4) if you had the money to life anywhere in the world would you really WANT to live in Detroit or some other economically depressed US city/state? (Put another way, if you one the Powerball, what incentive would you need to move to Moscow or Bombay or Mexico City [and those are fun cities]?)

denis March 22, 2009 at 2:26 pm

FE. according to a recent article by Bloomberg there are
19 million vacant homes in the U.S.

Steve Sailer March 22, 2009 at 3:39 pm

Um, 66% of all home value inflation during the Housing Bubble took place in the state with by far the highest percentage of foreign-born resident of any state in the union, California. Roughly the same percentage of all money lost on home mortgage defaults since then has been in California.

87% of all home value inflation from 2000-2007 took place in just four heavily immigrant states: CA, AZ, NV, and FL, with equivalent losses on foreclosures over the last two years.

So, how’d that immigration –> home price inflation strategy work out for us the last time we tried it?

SA March 22, 2009 at 4:35 pm

Alex, look closely … the post u claim by Barry is actually by John Maudin ( his weekly newsletter )… i think it is wise to give credit to the guy rather than Barry.

capitalistimperialistpig March 22, 2009 at 4:49 pm

I notice that you economists love the idea of bribing people to distort markets. Adam Smith wrote in vain.

ogmb March 22, 2009 at 5:16 pm

How about extending the OPT that comes with an F-1 visa to six years (and eliminates the need for an H1-B)?

AWilson March 22, 2009 at 6:51 pm

Ram. Probably right–we’d look up 5 years from now and wonder how we got into this new mess. AIG FP guys in London were selling AIG’s triple A rating as a cosigner for rent and we would be selling triple A citizenship rights. Quick fix may have lots of unintended consequences. May just have to take our medicine. Allen

On Mar 22, 2009, at 8:21 AM, Vissa Rammohan wrote:

My concern with schemes like this is the scope for abuse.
1. I understand that the median price of houses in Detroit is already less than $10,000. “Brokers† may buy up hundreds of houses and peddle them for visas.
2. A person buying a house for a visa may not care for the house.
3. This can become a bigger scam than immigrants marrying girls for visas.
4. Every dilapidated structure may become an instrument for immigration.

Phil March 22, 2009 at 11:47 pm

Not everything should be for sale.

What you are proposing is economic irrendentism, and the abrogation of the citizen’s rights of exclusion.

bvock March 23, 2009 at 2:04 am

i think the idea of buy a house, get a visa is an excellent idea. Not only would it help the fact that right now, millions of homes stand empty due to the build more houses boom that dominated much of the last decade; but it would add to the over-all tax revenue the government so desperately needs right now. Not to mention the benefits of pumping more money into the economy. Banks nationwide are failing due to bad loans, and bad financial decisions. A large portion of them have taken heavy losses in housing loans and mortgages. This program would help them cut their losses and start to recover, as well as put some of them ahead maybe?

It could also give more incentive for illegal immigrants already living in the country to pursue higher education to make more money so as to purchase a house, and thus, their visa. I imagine a cap and trade system would work nicely for this; giving out a set number of houses that can be purchased each year by illigal immigrants and as you’ve said, expanding the program to cover more visas while reducing the investment money.

As for the scope of abuse as was mentioned previously, i don’t think it would be overly difficult to regulate a program such as this so that

1. those who do get visas will have them rejected without proper care of the house.
2. only people participating in the program could get visas, and of those, one per family. This should stop people from buying multiple houses and peddling visas.
3. It would, i believe, do the opposite of creating a huge scandal, because it would encourage illegal immigrants to come forward and apply for the program, giving us a more definite idea of the number of illegal immigrants in the U.S., and hopefully give us the opportunity to do more about the problem of illegal immigration in a constructive manner.

Ricardo March 23, 2009 at 3:16 am

Look, America gave out a huge number of mortgages to immigrants — mortgage lending to Hispanics for home purchases increased 691% from 1999 to 2006…

And what did it get us? A Housing Bubble and a Crash.

Post hoc ergo propter hoc. If you look at the discussions surrounding subprime lending when it was actually getting started, you will see subprime was a consequence rather than a cause of the housing bubble. Low-income families were riding out the housing bubble with encouragement from mortgage originators and indirectly from investment banks who wanted to go long on real estate without actually investing in it directly. Instead, they let others do the investing while extracting equity through early repayment and refinancing fees.

Problem: our system is currently not set up to handle a large, nationwide decline in home values very well. Too many people and firms are long real estate.

Solution: keep home values from falling too far too fast.

The proposal is to attract foreigners with actual cold, hard cash to invest in homes so subprime lending is irrelevant. And the biggest groups to take advantage of this won’t be “non-Asian minorities” but either retirees from Western Europe (and the odd rich family from Columbia or Argentina) who want to buy property in Florida but don’t want to have to leave after staying 6 months and Chinese business families.

mary barnicle March 23, 2009 at 1:52 pm

Granting U.S. residence status (and, implicitly, ultimately citizenship) to foreigners who buy a house in the United States is a flawed idea if for no other reason than the existence of Medicare and Medicaid and the Supplemental Security Income (SSI) benefits. The SSI program pays a monthly sum to the disabled and elderly, benefitting immigrants who have not contributed to Social Security. SSI’s asset test excludes owner-occupied housing., so under this proposal, a modest down payment could provide the new resident and family with medical and SSI benefits that would vastly exceed mortgage costs. Creating additional transfer payments is no way to respond to the housing bubble.

David Merkel March 23, 2009 at 6:46 pm

I proposed something like this last year:

http://alephblog.com/2008/03/01/how-to-solve-the-housing-crisis/

Phyllis R. Colman March 30, 2009 at 8:59 pm

Silly discussion. THis “Investor Entrepreneur” Immigrant Visa is designed to stimulate the US economy- that is create 10 US worker full-time jobs and invest, that is, put at personal risk, $1 million dollars.

Remember that as a child if something seemed illogical, this was good sense on the part of a child. Good sense doesn’t go on sabbatical in adulthood.

Phyllis R. Colman March 30, 2009 at 8:59 pm

Silly discussion. THis “Investor Entrepreneur” Immigrant Visa is designed to stimulate the US economy- that is create 10 US worker full-time jobs and invest, that is, put at personal risk, $1 million dollars.

Remember that as a child if something seemed illogical, this was good sense on the part of a child. Good sense doesn’t go on sabbatical in adulthood.

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