Austin Business Journal reports, "A new Texas law that restricts land sales to citizens and businesses from certain countries may negatively impact investment in the state after Sept. 1, commercial real estate experts said.
Senate Bill 17, which Texas Gov. Greg Abbott signed into law last month, prohibits “real property purchases” — including residential, with some exceptions, as well as commercial, industrial and agricultural land — to citizens of or companies headquartered in China, Iran, North Korea and Russia. The law also bans “other interests in real property,” which include easements, mineral and water rights, and leases of more than one year.
The governor may designate additional countries to the list. Permanent U.S. residents are exempted from the law.
The new law could have far-reaching implications for business investment in the state, said Sam Chang, a Houston-based senior vice president and partner in the industrial division of commercial real estate firm Henry S. Miller.
Chang, who specializes in working with local and global clients, said two prospective Chinese clients he was helping have already declined to continue exploring expansion into the state following the passage of the law. He declined to name the entities.
“It’s just going to stop a lot of that initial discussion about investing in Texas,” Chang said of the new law. “This is commercial real estate. These aren’t small investments.”
Business-friendly Texas
Texas is a leading location for foreign direct investment. Between 2011 and 2021, Chinese companies recorded 38 investment projects in Texas, $2.7 billion in capital investment and 4,682 jobs created by 34 companies, according to a 2022 report by the Texas Economic Development & Tourism office.
When asked whether Gov. Abbott was concerned about the law's potential negative impacts on the Texas economy, Abbott's press secretary, Andrew Mahaleris, sent a statement pointing out that Texas leads the nation in foreign direct investment and expects to continue to lead in the future.
"Governor Abbott's top priority is the safety and security of Texans," Mahaleris said in the statement. "This law is critical to ensure foreign adversaries, or their agents, are not able to buy Texas land and set up operations in Texas. Just last month, Chinese nationals were arrested attempting to smuggle bioweapons in Michigan. Foreign threats to our country are real, and we must safeguard against those who wish us harm."
Over the past decade, the state has attracted 1,860 foreign direct investment projects, which are expected to create $189.6 billion in capital investment and more than 167,900 new jobs, per the Texas Economic Development & Tourism office.
Ambiguity of SB 17
SB 17 doesn’t go into effect until Sept. 1, and it isn’t retroactive, meaning that it would not affect any real estate deals closed before the law is implemented. However, the ambiguity of the law and the misinformation about its particulars are alarming some companies and business owners.
“We have other companies that are currently existing clients of mine asking me what the deal is,” Chang said. “There’s a lot of things that are in this bill that I think are not discussed.”
Chang is worried about his liability as a commercial real estate broker if he were to unknowingly represent someone from a prohibited country.
“How does this all work, and who is policing all this?” Chang asked.
State Rep. Gene Wu, D-Houston, chair of the Texas House Democratic Caucus, also said he is concerned about discrimination.
“People don’t know who is Chinese, who’s Japanese, and they sure as hell don’t know how to tell someone’s immigration status,” Wu said. “My fear, the fear of the community, has been all along that people are just going to say, 'You know what, I don’t know who you are, and I can’t tell what country you’re from — I’m just not going to sell to anyone who has an Asian face.'"
The law lays out that if an individual is found intentionally buying property, they could face jail time from 180 days to two years and a fine up to $10,000. The Texas attorney general may even sue the company or entity that bought the property, which could be hit with a fine of $250,000 or 50% of the market value of the property interest involved.
It’s this vagueness that could limit the amount of investment historically seen in Texas real estate markets, said Robert Soza, partner at law firm Jackson Walker LLP.
“Until we see the regulations, it may affect limited partners that acquire real estate by limiting the investors that they can permit. This is going to limit the pool, potentially, of buyers or investors,” Soza said.
Jenny Roan Forgey, senior council at Jackson Walker and an expert in land use and intricate real estate transactions, said she has already been fielding calls from buyers and sellers of commercial real estate who are confused about the regulations.
“If you’re a company or organization that is owned by a (prohibited) government, then you don’t get to own real estate — it can’t be directly or indirectly controlled or held,” Forgey said. “But then there’s this, 'if you’re an individual who is prohibited and you own a company.' What does that mean? Does it mean that every stockholder in the entire world has to be accounted for in a publicly held company? Or does it mean you can’t hold the majority of the company ownership?”
These questions will have to be answered by the state attorney general. The statute authorizes him to define the terms of the law and issue stipulations.
However, until then, some of the most confusing parts of the law will still cause havoc, commercial real estate experts said. Some are also worried about the "leases under one year" stipulation, which prohibits those subject to the law from signing leases for a year or longer.
“If you sign a lease for 11 months and 29 days, and you sign one continuously like that every time it expires, is that going to violate the law?” Soza asked. "I think it’s an interesting question."
The future
Both Soza and Forgey predict that the law will likely face multiple legal challenges once it goes into effect. As the law is currently written, it just has too many undefined terms that a court would be forced to define, Forgey said.
State Rep. Wu believes the law would violate the Equal Protection Clause of the 14th Amendment to the U.S. Constitution. Decades of case law have interpreted the amendment as prohibiting states from discriminating on the basis of race or national origin.
“We don’t know if the courts will stop this law from going into effect, as they have stopped a very similar Florida law that it’s based on," Wu said. "That case is headed to the Supreme Court right now.”
The Florida law was blocked by a ruling of the 11th Court of Appeals in Atlanta in February 2024. It bars Chinese citizens from owning homes or land in the Sunshine State.
Between January 2023 and July 2024, 22 other states have enacted land-purchase restrictions against foreign residents, data from the Congressional Research Service show.
“These types of laws have been found to be unconstitutional in the past,” Wu said. “They were passed 100 years ago, they were repealed, and now we’re passing them again.”"
Source: Austin Business Journal
Written by: Janet Miranda
Published: July 28, 2025
Posted by Grossman & Jones Group on
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