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.

Free At Last

Let’s hear how I got naturalized in the United States.

This is the story of one fine cold day a long time ago in a galaxy far, far away.

I woke up early and left home at 7:30am as I had to drive through rush hour traffic. It took me an hour to get to 2150 Parklake Dr. I went in, got through the metal detector and bag screening and took the elevator to the 2nd floor. The first thing I did there was to look for the restrooms. Then I waited.

My appointment was at 9:05am, but the interviewer came to get me at 9:35. I went to her office where I had to take an oath to tell the truth. She asked me for my driver’s license, passport and green card. Then she went over my application, asking about any changes. She also asked me if I had ever been a member of the Communist party or a terrorist organization, if I had ever been arrested, convicted, committed a crime or lied to the government. Then it was time for the test. She got the computer to print out 10 random questions about US civics, history and government. Those were real easy, but even easier were the one simple sentence she asked me to write and another that she asked me to read. She gave me a form telling me that I had passed the tests of English and US history and government and that my application has been recommended for approval. Then she asked if I wanted to be part of the oath ceremony the same day. Of course, I did. And so I was done in about 15 minutes.

I then sat in the waiting room for the oath letter for 45 minutes. When I got the letter, I realized I had time to kill as it was only 10:45 and the oath was at 2pm. I called Amber and we decided to go for lunch at Tamarind Seed Thai Bistro in Midtown. I had Spicy Lamb with Basil, which was spicy but was also very very tasty.

After lunch, I got back to the USCIS office and went to the room where the oath ceremony takes place. First, we had to check our naturalization certificates for any mistakes. Then we were all seated. Every seat had a packet which contained:

When all the prospective citizens were seated, their relatives who had come to witness the ceremony were called in.

The Field Office Director then talked a bit and told us that there were 110 people becoming citizens and they came from 44 countries. Then she called everyone to stand going by their country of origin. I couldn’t note down the list of countries represented there, but there were Afghanistan, Guyana, Iran, Ireland, Pakistan, Mexico, India, South Africa, Kampuchea, Ireland, Yugoslavia and others. Then all of us held up our right hands and repeated after the Director the oath of allegiance.

I hereby declare, on oath, that I absolutely and entirely renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state, or sovereignty of whom or which I have heretofore been a subject or citizen; that I will support and defend the Constitution and laws of the United States of America against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I will bear arms on behalf of the United States when required by the law; that I will perform noncombatant service in the Armed Forces of the United States when required by the law; that I will perform work of national importance under civilian direction when required by the law; and that I take this obligation freely without any mental reservation or purpose of evasion; so help me God.

While we were taking the oath, the relatives who had come along were taking pictures.

And suddenly, we were all citizens of the United States. Then we recited the pledge of allegiance, which I have always liked without the words under God.

I pledge allegiance to the flag of the United States of America, and to the Republic for which it stands: one Nation under God, indivisible, With Liberty and Justice for all.

Then the Director reminded us of what we needed to do: Change status with the Social Security Administration, apply for a passport and register to vote.

Finally we saw a video welcome by President George W. Bush. On our way out, we took our naturalization certificates. The employees at the front desk and the security personnel congratulated us as we were leaving the building. I have never seen anyone at INS or USCIS act so courteous before.

Let’s get back to the title of this article: Free At Last! No, that doesn’t refer to the freedoms guaranteed by the US constitution. Instead, it celebrates my freedom from the United States Citizenship and Immigration Services (USCIS). I have never seen a worse bureaucracy.