A Proposal for Uniform Regulation of Foreign Investment in American Real Estate

Foreign investment in U.S. real property is often both economically desirable and problematic.Investment draws needed capital into this country, thereby expanding tax bases and offsetting trade deficits.Yet, many Americans are concerned that foreign ownership of U.S. real estate surrenders control of an extremely vital and basic resource into the hands of foreigners.Foreign ownership may also disrupt domestic land markets by increasing land prices to levels at which many U.S. investors cannot afford to purchase land.'Recent investment activity in U.S. real estate 2 has thrived despite these fears and the non-uniformity of state and federal attempts to minimize incentives.At the end of 1974, foreign investors owned 4.9 million acres of U.S. real property, and foreign-owned U.S. enterprises leased 63 million acres.3 Recent figures indicate that the amount of foreign investment in U.S. real estate is increasing.Despite a decline in total foreign invest-1.See The Foreign Land Grab Scare, TIME, Jan. 8, 1979, at 40. 2. The term "real estate investment" has several meanings.Technically, it means the purchase and sale of real property solely for the property's investment value.The U.S. Department of Commerce and other informational sources describe a real estate investment as a sub-category of "foreign direct investment."Other types of investment may also involve real property and thereby affect land ownership patterns.Because this Note evaluates the effects of foreign investment activity upon land use patterns and local communities, a broader definition of land investment is appropriate.Therefore, this Note defines "real estate investment" as any investment activity that involves, even tangentially, the purchase and sale of real estate.For example, although the location of a Volkswagen automobile plant in Pennsylvania is technically an industrial or manufacturing investment by a West German corporation, this Note considers this activity to be a real estate investment.See infra notes 102, 107 and accompanying text.A "benchmark survey" of foreign investment by the Department of Commerce in 1974, pursuant to the Foreign Investment Study Act, Pub.L. No. 93-479, 88 Stat.1450 (1974), discovered 829 affiliates classified in real estate investment or in combined offices of real estate, insurance, finance, and law.This survey did not, however, include several activities that have a significant effect on real estate, such as hotel and resort operation within the real estate.