Buy a House, Get a Green Card?

Some people are suggesting an immigration program “buy a house, get a green card” but I argue that their numbers are all wrong.

Last month, Thomas Friedman wrote in the New York Times that:

Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.

“All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.”

Alex Tabarrok called it the “buy a house, get a visa” strategy and claimed that:

the multiplier on the “buy a house, get a visa” strategy would be much larger than any possible domestic multiplier since the money would come from outside the economy (and efficiency would improve as well.)

An op-ed in the Wall Street Journal has now suggested the same.

The Obama administration should seriously consider granting resident status to foreigners who buy surplus houses in this country.

[…] A better idea is to offer permanent residence status to the many foreigners who are clamoring to get into the U.S. — if they buy houses of minimal values (not shacks). They wouldn’t need to live in those houses, but in order to remove the unit from the total housing market, they couldn’t rent them. Their temporary resident status granted upon purchase would become permanent after, perhaps, five years, if they still owned the houses and maintained clean records. The mere announcement of this program might well stop the ongoing collapse in house prices, especially in cities such as Las Vegas, Miami, Phoenix and San Francisco, where prices are down 40% — but where many foreigners like to live.

Each year, 85,000 H-1B visas are granted for foreigners with advanced skills and education, and last year, 163,000 petitions were filed in the first five days after applications were accepted. The Ewing Marion Kauffman Foundation estimates that as of Sept. 30, 2006, 500,040 residents of the U.S. and 59,915 individuals living abroad were waiting for employment-based visas. Many would buy homes if their immigration conditions were settled.

[…] The blueprint for a program to sell surplus housing to immigrants is already in place with the EB-5 visa program. Each year, 10,000 EB-5 visas for this country are available for foreigners who each invest $1 million in a new enterprise ($500,000 in economically depressed areas) that creates at least 10 full-time jobs. After two years, the entrepreneur and his family can become permanent residents.

Of course, Alex Tabarrok liked it while Matthew Yglesias says:

I don’t think this idea is nearly the panacea that Gary Shilling and Richard LeFrak seem to think it is, but nevertheless a program to offer permanent resident status to foreigners who buy American houses does seem to me like a good idea.

John Mauldin goes completely overboard:

Let’s assume one million new immigrants would buy homes. At an average price of almost $200,000, that would be $200 billion injected into the economy. And each of those homes has to be furnished, food has to be bought, clothing will be needed, local taxes will be paid. Airplane tickets to research potential areas, hotels needed during the interim period, and other related expenditures would add up. Over two years, this could easily be another $100 billion.

I am not an economist and I’ll leave it to economists to discuss the multiplier and stimulative effects of this program. However, I am an immigrant and have looked at the immigration details in the US fairly extensively.

Let’s first look at the average number of immigrants per year to the US in the period 1998-2007: 935,948. It reached a peak of 1,266,129 in 2006 but was down to 1,052,415 in 2007. When 2008 data comes out, it is expected to go down further because of the economic conditions.

Contrary to Mauldin, these one million immigrants won’t all buy houses since the number of households is less than a million. The average household size in the US is 2.61. I remember reading that immigrant household size is larger but I can’t find that data right now, so using the US number, we get only about 400,000 households.

Before you start liking the 400,000 households number, remember that a majority (621,047 in 2007) of the immigrants were adjusting status, i.e. they were already in the US. At least some of those already bought a house since they were planning to immigrate. I know lots of H-1B visa holders who bought houses and later adjusted to permanent resident status.

The Wall Street Journal op-ed mentions an already existing investor immigrant program EB-5. Let’s look at its conditions:

10,000 immigrant visas per year are available to qualified individuals seeking permanent resident status on the basis of their engagement in a new commercial enterprise.

Of the 10,000 investor visas (i.e., EB-5 visas) available annually, 5,000 are set aside for those who apply under a pilot program involving an USCIS-designated Regional Center.

In general, “eligible individuals” include those

  1. Who establish a new commercial enterprise by:
    • Creating an original business;
    • Purchasing an existing business and simultaneously or subsequently restructuring or reorganizing the business such that a new commercial enterprise results; or
    • Expanding an existing business by 140 percent of the pre-investment number of jobs or net worth, or retaining all existing jobs in a troubled business that has lost 20 percent of its net worth over the past 12 to 24 months; and
  2. Who have invested — or who are actively in the process of investing — in a new commercial enterprise:
    • At least $1,000,000, or
    • At least $500,000 where the investment is being made in a “targeted employment area,” which is an area that has experienced unemployment of at least 150 per cent of the national average rate or a rural area as designated by OMB; and
  3. Whose engagement in a new commercial enterprise will benefit the United States economy and
    • Create full-time employment for not fewer than 10 qualified individuals; or
    • Maintain the number of existing employees at no less than the pre-investment level for a period of at least two years, where the capital investment is being made in a “troubled business,” which is a business that has been in existence for at least two years and that has lost 20 percent of its net worth over the past 12 to 24 months.

Now this EB-5 might have requirements that are too onerous and it’s always possible that the optimal investment is less than a million dollars and other conditions should be relaxed as well.

However, let us look at the number of immigrants admitted to the US under this program. The average number of EB-5 visas per year in the period 1998-2007 was 375. In 2007, the number of investor visas used was 806. This is not the number of investors, but of visas which includes family too. Let’s break down the numbers for 2007.

Adjustment of Status New Arrivals Total
Total EB-5 315 491 806
Investors 116 163 279
Spouses & children 187 328 515

As you can see, 10,000 visas per year were reserved for this investor program, but in the maximum used was about 8% of that. And the actual number of investors (not including dependents) in 2007 was only 279. Assuming the buy a house, get a green card program does a level of magnitude better because median house price (for 2005-7) is only about 181,800. Still, it would attract only about 3000 investors and their families. That would not do anything to the housing market or the US economy.

PS. The immigration numbers are from the 2007 Yearbook of Immigration Statistics, specifically Table 6 and Table 7.

Homosexual Marriage: Civil Right of Self-Interest?

Are homosexuals asking for a privilege given only to heterosexuals, or are they asking for something denied to both groups?

The debate over homosexual marriage is simmering again in California. Opponents of Proposition 8 are making their case in the California Courts, arguing that California’s recent constitutional amendment violates the civil rights of those engaged in homosexual practices.

To gain clarity on this discussion, one can put it in a different context. Consider a sandwich shop on Crow Street, U.S.A. A white man walks into the sandwich shop, looks at the menu and orders a turkey on rye sandwich. An attendant prepares the sandwich and gives it to the white man. The white customer pays the attendant and walks out. Then, a black man comes to the same shop, orders the same sandwich but receives a very different response. The black man is told that this shop cannot serve him.

This is an example of what? If all else is equal, we clearly witnessed an example of a civil rights violation. Specifically, we are seeing Jim Crow racism in action. Why? Put simply, the white man could get something the black man could not simply because of his skin color.

Now, let us look at a modification of the previous scenario. A black man walks into a sandwich shop on Main Street, U.S.A. He walks to the counter without viewing the menu or glancing at the order board above the attendant’s head. Then, he asks for a Brontosaurus on Soylant Green sandwich. Dumfounded, the attendant replies, “Well, sir, that’s not on the menu.” He continues, “The brontosaurs went extinct millions of years ago and Solyant Green is just a mythical construct invented for a 1970s movie starring Charlton Heston.” The resigned though still hungry black man walks out, passing a white man on the way into the shop. The white man, astonishingly, asks for the same brontosaurus on Soylant Green sandwich. To this request, the attendant counters, “look, pal, I do not know what type of joke this is, but that’s just not on the menu.”

Now, this is an example of what? A civil rights violation? Racism? No. They received equal treatment. Both the white man and the black man asked for the same thing, and both were refused. The reason was simple; the request was not on the menu.

Moving closer to our targeted issue, imagine a justice of the peace’s office on Getto Street in Warsaw, Poland in 1940. A blond haired, blue eyed Methodist (a protestant Christian denomination) woman walks into the office arm in arm with the man who hopes to marry her. After explaining their intentions, the German appointed justice of the peace asks for their papers. He reviews them, abruptly stops and harshly says, “You, sir, are a Jew. A Jew will never marry an Aryan in Hitler’s Poland!” The couple withdraws in fear. A month later, the same woman returns with a Methodist male companion and requests a marriage license. The same justice of the peace reviews their papers and grants the happy couple a marriage license.

What is this? A civil rights violation has occurred. In this situation, we see religious discrimination. The Jewish fiancée was denied the right to marry his gal, but a protestant man was able to marry the woman without a problem.

Let’s return to Ghetto Street. As a way of compensating for losing his one love, the Jewish man finds three Jewish women willing to enter into a polygamous marriage with him. So, he braves the justice of the peace once more to ask for a marriage license. Without even looking at the papers of the four people before him, the justice exclaims, “You want to marry how many girls! This is, of course, entirely illegal, and I cannot do it.” Moments later, a Methodist man arrives with three blonds in tow. He says, “I can’t wait to marry these gals; let’s get the paperwork out of the way!” To this the justice responds, “This must be international polygamy day! However, the law remains; you cannot marry more than one woman, sir.”

In this scenario, we again see the difference between a civil rights violation and fair application of a rule. Neither man could marry his trio. The discriminatory religious preference of the justice of the peace did not affect his decision. The law stated that one person could have but one spouse at a time, and the justice applied the law fairly.

Connecting the two situations and four scenarios described, one can see that both highlight the difference between civil rights violations and fair applications of societal prohibitions. Civil rights violations occur when a particular group enjoys privileges fundamentally denied to others. When you strip the emotion and religious arguments away, it is fairly easy to see and understand this.

Let’s apply our newfound clarity to the homosexual marriage issue. We need to answer one fundamental question. Are homosexuals asking for a privilege given only to heterosexuals, or are they asking for something denied to both groups? In the former case, homosexuals would be the victims of a civil rights violation, but in the latter, they are simply asking for something “not on the menu.” Homosexuals are asking for the ability to marry people of the same sex. Heterosexuals have not asked for this ability, but under current laws, same sex marriage would be denied to heterosexuals as well. Neither group benefits from its sexual practices. Neither group enjoys a privilege denied to other. Therefore, homosexuals are not suffering a denial of rights. They are merely asking for a change in existing laws meant to benefit their group, a case of simple self-interest – not civil rights.

All About Eve

Great classic. Worth watching, if you haven’t already.

All About Eve is a classic story, starring Bette Davis and Anne Baxter, of ambition and betrayal.

Everyone’s great in the movie and we loved it. I rate it 9/10.