This article appeared first on CanadianBusiness.com
The massive U.S. immigration overhaul bill that’s currently winding it way through Congress contains a special little something for Canada’s snowbirds: A clause that allows those 55 and over who own or rent a home in the States to stay there for up to eight months per year without a visa, rather than six, before losing non-resident status for tax purposes.
The bill also introduces a special retiree visa for seniors who can make a cash purchase of a U.S. home worth US$500,000 and up. Though the second provision doesn’t single out Canadians specifically for the privilege, it’s certainly a welcome treat for well-to-do Canuck pensioners.
North of the border, the provisions were greeted as a pleasantry aimed at elderly visitors. “We support any efforts to increase trade and tourism between our two countries,” said Caitlin Workman, a spokeswoman for the Department of Foreign Affairs and International Trade.
But the evidence suggests the clauses originated less as an attempt to boost tourism and more as an effort to spur home purchases—an effort that might no longer be needed.
Similar provisions appear in a 2011 bipartisan bill sponsored by Democratic New York Senator Charles Schumer, who is also the lead sponsor of the current jumbo immigration bill. At the time, the initiative was billed as a sort of housing market stimulus. “This concept has the potential to lift demand for the nation’s excess homes,” the senator is quoted saying in a press release about the bill, “Our housing market will never begin a true recovery as long as our housing stock so greatly exceeds demand.”
The bill never moved past committee stage, but the idea of inviting moneyed foreigners to help lift the sinking real estate market had numerous backers at the time, including Warren Buffett.
But as the U.S. housing market recovers, property snatched up by foreigners suddenly doesn’t seem like “excess homes” anymore. Concern is growing in Congress that the rich home buyers from abroad are crowding out American families.
“Your average working family, at least where I live, is not able to buy a home,” Democratic Congresswoman Loretta Sanchez recently lamented during Federal Reserve Chairman Ben Bernanke’s latest testimony. “Cash offers, from in particular foreign markets, are wiping them off,” she said.
Ms. Sanchez lives in California, home to some of the country’s hottest residential real estate markets and a favourite among foreign buyers, along with Arizona, Texas and, naturally, Florida.
International buyers made up as much as 4.8% of U.S. home sales in 2012, according to the National Association of Realtors, and Canadians accounted for nearly 25% of those purchases, by far the largest group. Canucks dominate the charts in Arizona and Florida, but even in California, where Chinese buyers are the majority, Canadians made up a sizable 13% of buys.
The view that foreigners and all-cash bidders are condemning some of the locals to become “permanent renters,” as Sanchez put it, seems unfair. After all, investors—domestic and foreign—are a big reason why home prices started rising again in the first place. Also, many credit-worthy, lower incomes families can’t get in the home market because mortgage lenders are still unreasonably cautious. And in California, it seems, all-cash buyers are pushing first-time buyers into the distressed market, which is helping take off the market houses that might have otherwise weighted on the state’s housing supply for much longer.
Still, if Congress’ grumblings about foreign buyers increase, Schumer’s visa concessions might start to look like a low hanging fruit fix.