Congress Shows New Interest in Restrictions on Foreign Real Estate Investment

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Mar. 13, 2024
By: Marvin E. McPherson

Citing national security concerns, Congress has shown an increased interest in restricting real estate transactions by foreign individuals or entities in the United States. These discussed restrictions focus on the acquisition of or direct investment in real estate with close proximity to military bases, access to key infrastructure like airports and seaports, and agricultural lands.

The Appropriations Act 2024 cemented those proposed restrictions on transactions by foreign persons in U.S. real estate. Section 787 of the Appropriations Minibus appoints the Secretary of Agriculture as a member of the Committee on Foreign Investment in the United States (CFIUS) committee. The Secretary of Agriculture will review covered transaction as defined in section 721(a)(4) of the Defense Production Act involving agricultural land, agriculture biotechnology, or the agriculture industry (including agricultural transportation, agricultural storage, and agricultural processing). The minibus also adds directives for the Secretary of Agriculture to work with the Intelligence Community to notify the CFIUS committee of any covered agricultural land transaction that may pose a risk to national security. The minibus specifically emphasis transactions involving people and entities from the People’s Republic of China, the Democratic People’s Republic of Korea, the Russian Federation, and the Islamic Republic of Iran.

The appointment of the Secretary of Agriculture as a member of the CFIUS committee is a significant signal toward expanding CFIUS’ review of real estate, as agricultural lands are not listed under Part 802 of the CFIUS regulations as a stand-alone covered property.

The Congressional Research Service report Selected Recent Actions Involving Foreign ownership and investment in U.S Food and Agriculture, indicates that further amendments to CFIUS are likely forthcoming.

The CRS report highlights the interagency work and studies done on reviewing foreign ownership of U.S agricultural lands. Of note are the reporting requirements of beneficial ownership information of businesses across all industries—including those in the food and agricultural sectors to the U.S. Department of Treasury’s Financial Crimes Enforcement Network. The report signals new usage of that data as it relates to CFIUS’s enforcement of covered transactions review requirements.

Congress has demonstrated its belief in CFIUS’s crucial role in overseeing and approving foreign direct investment (FDI) and real estate transactions. Industry is likely to see more movement and regulations regarding CFIUS’s jurisdiction and further restrictions on land transactions involving foreign individuals or entities.

Stay informed about these regulatory updates for compliance in the evolving landscape. If you have any questions surrounding a real estate or other covered CFIUS transactions, please contact any attorney at Barnes Richardson and Colburn.