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Visa Improvements to Stimulate International Tourism to the USA Act
112th Congress, 2011–2012

In October and November 2011 two bills were introduced to stimulate Tourism and Investment in the USA, by providing residential visas to foreigners who spend at least $500,000 to buy residential real estate in the USA.

Applicants can either spend the entire amount on one house, or buy one residence and invest the rest in other residential real estate, which can be rented out. The measure would complement existing visa programs that allow residency if an investment is made in new businesses that create jobs.

Undoubtedly, the vote on these proposals will be subject to fierce debate between the political parties, especially during a presidential election year. As with other recent new proposals, it is unfortunate that the debate will probably target populistic and entirely political designs rather than the housing market, and a solution for the economic brake of the numerous foreclosures.

A new Residential Visa ?

The B Visitor Visa is a non-immigrant visa for entering the United States temporarily for business (B-1) or for pleasure, tourism or medical treatment (B-2). The length of stay accorded to this Visa is not only subject to the duration of the trip, accorded at the time of entrance into the country, but also to a restriction of six months per calendar year. This latter restriction is applied at the sole discretion of the Immigration Officer, though an extension can be applied for, up to one year.

visa 04Obviously this limitation in time is a major handicap for foreign investors, as well as for foreign home owners, since they can only enjoy their homes for six months out of the year. Nevertheless, property and other taxes, utility bills and insurances are due for the entire year.

A more extended temporary foreign residency permit would undoubtedly present spectacular advantages to the housing market and the local economy, and would be sure to attract many investors from Europe, Canada, the UK and other countries.

The proposed measure would be comparable to the EB-5 Immigrant Investor visa, created by Congress in 1990, to stimulate the US economy through job creation and capital investment by foreign investors. The requirement is to create or preserve at least 10 full-time jobs for qualifying US workers within two years.

The American Economy and Real Estate

Every Real Estate market is basically cyclic, with ups and downs. When the upward cycle was favorable, new construction "boomed" on an immense scale because of the enormous profits. A grandiose construction boom unfortunately and inevitably invites speculation, not only from the builders, but also from associated sectors such as banks, constructors, local administrations, insurances, land owners, large scale investors, subcontractors, workers, and even "savvy" individuals who stand to make a quick return through house flipping. Over the last decades, these cycles have taken place in every developed country, and they are usually more pronounced in locations blessed with a benign climate.

Usually outside events such as an economic crash, war, disease, unbridled taxes, or massive lay-offs completely change the trend of the real estate market, and it just folds until the next upward cycle.

In this particular case, several problems surfaced almost simultaneously. A deep financial crisis offset banking liquidity, the resulting credit crunch offset the economy, real estate prices plunged, which in turn caused uncounted foreclosures, countless real estate and associated construction companies went out of business, local administrative services became under-budgeted overnight because of a considerable decline in tax returns, and as a general result, unemployment spiked sharply.

Before the housing market and indeed the general economy can redress itself, any solution will inevitably have to address the formidable quantity of unsold but available homes. Unfortunately, this problem is politically very delicate. When the large automobile manufacturers nearly went bankrupt, the media immediately targeted the threatening loss of one million jobs. When the financial sector completely broke down, apparently no other news even made the headlines.

In both cases, the political reaction and very generous financial support was almost instantaneous. However, when the nation's entire housing market collapsed, which dragged along the rest of the economy and nearly wiped out the entire middle class, nearly EIGHT MILLION jobs were lost, without ANY serious media response or political support. Most probably, the personal connections or lobbyists of this class were not up to the task...

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America has an enormous but as yet untapped potential to bring some relief to at least a few of these problems. Would it not be a fresh perspective to open up the Housing Market to foreign retirees and investors ? If there is any doubt about the enormous potential of this retiree segment, simply Google "foreign retirees" or "European retirees" on the Internet !

In Europe, the traditional "retirement" house markets are the French, Italian and Spanish Riviera, and about the entire Mediterranean area, whose climate is somewhat comparable to Florida. However, true "Retirement Communities" such as exist in the USA are practically unknown in Europe at this time.

Even though these European real estate markets are enormous, in the last twenty years they have been ruinously overbuilt, they are severely overpriced, and they usually have a poor building quality. A worldwide flood of retirees and investors are looking elsewhere for decent and affordable homes.

Foreigner investors account for a quickly growing share of home purchases in Florida, California, Arizona and the Sun belt in general. They want to take advantage of the current hefty drop in prices of American homes, the favourable foreign exchange rates, the better climate, and last but not least, the far more secure investment climate than elsewhere. Europe stands on the brink of a deep recession, and even China and the Emerging Markets are bound to backslide.

Foreign Purchases of Real Estate

In Florida, foreign buyers account for more than 30% of all real estate transactions in 2010, and more that 45% in 2011 ! Other states that are popular with foreign home buyers are California, Texas, Arizona, Illinois, Tennessee, Nevada, and New York.

The Florida decline in home prices between Q3 2006 and Q3 2011 was 49%, the third highest in the nation. The 11.9% foreclosure rate for 2011 was the highest in the US. The state’s mortgage payment delinquency rate (MDR) was 17.4%, the nation’s absolute highest, more than twice the national average, and more than two points higher than the next worst state, Nevada.

The Nevada decline in home prices between Q3 2006 and Q3 2011 was an incredible 59.3%, the largest in the nation. However, the 5.3% foreclosure rate for 2011 was less than half of the Florida rate.

visa 01In 2010, foreign home buyers bought some $41 billion worth of US homes ! As Europe’s financial crisis deepens and turns into a recession, Europeans will spend less on their own continent on nearly everything, including real estate.

But those Europeans who still can invest, are looking at US assets, including real estate, that could very well turn out to be far better investments than European stocks, bonds or property.

International interest in American real estate is growing quickly, and particularly in Florida, where the low real estate prices attract foreign investors, who compare them to the astronomical prices of the Mediterranean areas.

With more visitors flocking to the warm Florida temperatures, and with growing financial unrest in the rest of the world, many foreigners view American real estate as a safe haven, with a secure and reasonable return, and an almost certain appreciation in the mid-long term.

Advantages for Foreign Investors

The United States, and in particular Florida, has several trumps to attract foreign retirees and investors.
- Very competitive home prices
- A very favourable dollar exchange rate
- A higher standard of living than elsewhere
- Specialized Retirement communities
- An extensive legal system and guaranteed home owner security
- Excellent health care services and hospitals
- Outstanding communications
- A simply unequalled climate !

Advantages for the United States

Attracting foreign home owners and residents would be very beneficial for the American economy.
- An important potential for home sales
- Lower rental prices through the large supply of new rental homes
- A more than average well-to-do public would be attracted
- An unquestionable solvency, as homes are to be paid in full, without mortgages
- Sizeable spending on home acquisition, but also on related taxes
- Related spending, such as home improvement, insurance, cars, living costs, taxes, food, travelling, etc., would provide a further steady and recurring source of income
- Since retirees are elderly, there would be no need for additional schools, roads, and infrastructure
- Nor for that matter, would there be a question of augmented traffic or crime...
- Grandparents unavoidably attract their families, resulting in more vacation spending
- An unbeatable and worldwide Public Relations, because "Seeing America is believing in America"
- And finally, retirees and investors do not take away American jobs, they create new ones !

A delicate point : Foreign Immigration

The main handicap for investors and retirees is unquestionably the current Immigration laws. Although acquisition of US property is unlimited, the benefit of occupation is limited to six months per year. Since property taxes, other taxes, and all the utilities obviously continue throughout the whole year, that limited period of occupation is not very cost effective for foreign retirees. To say nothing of the aggravating knowledge of owning a beautiful home, that has to stand empty for six months...

Most, if not all foreign retirees would probably not be interested in actual immigration or citizenship. The most obvious reason for this would be the Health Insurance system in most foreign countries, whereby they are fully insured in their respective country for the rest of their lives, and the near impossibility to enroll at their age in a very expensive US Health Insurance Plan. Most Europeans will retire to their home country and family when advanced age or health issues force them into retirement homes.

According to the USCIS, the Length of Stay problem could be solved by applying for a "Green Card", which doubles as a Permanent Residence Permit. However and unfortunately, this solution is out of bounds for Retirees, since a Green Card is work related, and Retirees by definition stopped working...

An "Extended Stay Visa for Foreign Homeowners" surely would remove the mayor obstacle to a considerable, but part time foreign residence in a benign climate.

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