U.S. Expanding Crackdown On Foreign Real Estate Deals Near Military Bases

Foreign real estate activity near military installations could be put under more scrutiny, according to a new proposal set forth by the Biden administration.

The proposal by the Treasury Department is intended to block land acquisitions from foreign investors that could be deemed a national security threat. 

It would expand the power of the chair of the Committee on Foreign Investment in the United States, The Wall Street Journal reports. 

CFIUS usually focuses on corporate deals but was granted jurisdiction over real estate transactions near certain military installations in 2018. The new proposal adds more than 50 installations spanning 30 states to the list. 

The group would have the power to review transactions within a 1-mile radius of 40 additional installations and a 100-mile radius of 19 more installations. Bases added to the docket include Wright-Patterson Air Force Base in Dayton, Ohio, and Joint Base Cape Cod in Sandwich, Massachusetts. The latter is within 100 miles of Boston, which in theory could put that metro under CFIUS review, but the policy exempts most deals in urban areas.

“CFIUS plays an integral role in U.S. national security by thoroughly reviewing real-estate transactions near sensitive military installations, and this proposed rule will significantly expand its jurisdiction and ability to accomplish this vital mission,” Treasury Secretary Janet Yellen said in a press release.

The U.S. has been cracking down on foreign real estate activity over the last few years in a variety of ways, particularly amid growing concerns over China and Russia. 

A high-profile project caught up in CFIUS’ crosshairs is the California Forever group's attempt to create a new city northeast of San Francisco and near Travis Air Force Base. 

The project's website says 3% of its funding comes from overseas, and CFIUS contacted the group at the end of 2022 for proof of U.S. money being used to buy the land. The group compiled, according to the WSJ, but California representatives have called for a formal investigation. So far, there hasn't been an update on one. 

In 2023, Gov. Ron DeSantis blocked foreign landownership in Florida of more than 2 acres and within 5 miles of a military installation, citing national security concerns. However, in February, a federal court partially blocked the ruling, saying it was unlikely to hold up in legal disputes. 

Florida isn't the only state taking such measures. More than 30 states have blocked or are in the process of blocking foreign property ownership with new legislation. In Texas, for instance, a bill banning Chinese citizens from buying land was proposed in 2023 but didn't make it out of committee amid protests.

Separately, the federal government is getting more aggressive about foreign money laundering through property. In February, the Treasury Department proposed a rule that would require real estate professionals involved in all-cash deals to flag suspicious activity. Criminals laundered $2.3B through U.S. real estate from 2015 to 2020, Yellen said in a statement. While such rules have existed for years, cash real estate deals were generally exempt. 

Foreign investment in the U.S. has fallen by two-thirds, reaching only $5B in the first quarter of this year, down from $15B in Q1 2023. High U.S. interest rates and slowing transaction activity are the prime causes, but the spotlight on foreign activity could further slow deal-making.