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Buy a House, Get a Visa (2)
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.
Posted by Alex Tabarrok on March 22, 2009 at 07:40 AM in Economics | Permalink
Comments
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.)
Posted by: Andrew at Mar 22, 2009 8:01:00 AM
Possible TINSTAAFL side-effects for Andrew:
Rich foreigners who otherwise wouldn't meet the requirements to get in might be able to find easier access through this.
All some of this investment could go to less-useful programs, though it seems they'd go to less-useful programs in the US and the "more useful" programs would be over seas. So less efficient global allocation of capital.
Foreign capital crowds out native US investors who would otherwise have invested in these opportunities, potentially driving US capital overseas.
All of these seem pretty benign to me. I really like this idea. We always like to tell ourselves that one of the things that makes the US great is the freedom it offers. Seems like if we're concerned about strengthening this country, we should be willing to use this as a selling point to bring in foreign capital and foreign skilled laborers.
Posted by: mravery at Mar 22, 2009 10:26:08 AM
In the last 10 years the average the average number of people utilizing the EB-5 visa is less than 800 per year.
Posted by: Zack at Mar 22, 2009 10:57:00 AM
The downside is that sooner or later, bleeding hearts will start whining about how unfair this is to immigrants who can't afford a house. At that point, congress will figure out a way to subsidize it.
Posted by: ian at Mar 22, 2009 11:26:29 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]?)
Posted by: Jim at Mar 22, 2009 11:30:22 AM
There is no "surplus housing." It's not as if houses are vacant and going to waste because there are not enough Americans to live in them. To the extent there are vacancies, it's because banks and the government are refusing to let the market clear. How do we explain to Americans renting or bidding on these houses that they will need to move downmarket because we're importing foreigners who can outbid them?
Posted by: FE at Mar 22, 2009 1:45:22 PM
FE. according to a recent article by Bloomberg there are
19 million vacant homes in the U.S.
Posted by: denis at Mar 22, 2009 2:26:25 PM
Andrew,
Some further expenses for the lunch tab include remittances. That is, someone moves here, starts their business, and sends much of the profits back to their home country. We'd still benefit from the increased economic activity, but this might cause some capital flight in the form of remittances.
It's mutually beneficial trade, it's about as close to free lunch as economics will let you get.
Posted by: Peter at Mar 22, 2009 2:58:57 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?
Posted by: Steve Sailer at Mar 22, 2009 3:39:47 PM
Why is it a good idea to inflate housing prices? Don't we want housing to reach normal, affordable levels?
Posted by: Cliff at Mar 22, 2009 3:54:14 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.
Posted by: SA at Mar 22, 2009 4:35:28 PM
Sounds good to me. I personally would prefer to see housing prices drop even further (I'm a renter right now). But if we're going to subsidize the fools who over paid, better it be an immigrant who does so voluntarily.
Posted by: Christopher Rasch at Mar 22, 2009 4:40:00 PM
I notice that you economists love the idea of bribing people to distort markets. Adam Smith wrote in vain.
Posted by: capitalistimperialistpig at Mar 22, 2009 4:49:29 PM
Do you want to increase the demand for housing? Then eliminate the property tax!
Posted by: Richard A. at Mar 22, 2009 5:12:36 PM
How about extending the OPT that comes with an F-1 visa to six years (and eliminates the need for an H1-B)?
Posted by: ogmb at Mar 22, 2009 5:16:30 PM
You're allowing a free trade that wouldn't have happened otherwise. This policy does not necessarily need any particular downsides.
Posted by: Eliezer Yudkowsky at Mar 22, 2009 6:11:34 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.
Posted by: AWilson at Mar 22, 2009 6:51:43 PM
Do free men live behind bars?
Posted by: Harkins at Mar 22, 2009 8:04:17 PM
Not everything should be for sale.
What you are proposing is economic irrendentism, and the abrogation of the citizen's rights of exclusion.
Posted by: Phil at Mar 22, 2009 11:47:19 PM
How about we just let the price of housing fall, and let people who invested responsibly benefit? Not to mention grad students 6 months or so away from entering the home-buying market, a demographic very near and dear to this commenter.
Posted by: Zdeno at Mar 23, 2009 12:45:37 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.
Posted by: bvock at Mar 23, 2009 2:04:13 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. Everybody thought lending more to minorities was a fabulous idea -- Bush, Clinton, Obama, Angleo Mozilo, Barney Frank, Kerry Killinger. Down payments were cut. Documentation was cut. Who needs documents. They're undocumented! Only evil racists would dare bring up HateStats about Non-Asian Minorities' ability and propensity to pay back these huge mortgages.
And what did it get us? A Housing Bubble and a Crash.
So, now Alex wants us to indulge in more hair of the hair of the dog that bit us.
Posted by: Steve Sailer at Mar 23, 2009 2:33:08 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.
Posted by: Ricardo at Mar 23, 2009 3:16:27 AM
Why would rich foreigners want to move to the united states? Seriously... there are far far better places to live if you are very rich.
The US is the best place to move if you are poor or middle class and willing to work hard, its pretty horrible if you are rich.
Posted by: Doc Merlin at Mar 23, 2009 9:26:49 AM
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.
Posted by: mary barnicle at Mar 23, 2009 1:52:10 PM
