Thursday, September 22, 2011

Immigrants of Means Are The Solution

The solution to the present U.S. financial (read "housing") crisis that makes the most sense to me involves well-heeled immigrants.  Here's the original theory, as elucidated by its originators, Richard S. Lefrak and A. Gary Shilling, back in 2009:  "The Obama administration should seriously consider granting resident status to foreigners who buy surplus houses in this country... Excess inventory is the mortal enemy of house prices ... Doing nothing to eliminate the excess inventory might well push the recession through 2010 and into a depression... As consumers retrench, production is cut, payrolls are slashed, and consumer confidence, incomes and spending are savaged in a self-feeding downward economic spiral. But if the government buys surplus houses and sells them at low market-clearing prices, other house prices will drop, destroying more home equity and driving many more mortgages under water. Bulldozing excess houses would be an inefficient end for perfectly habitable structures. 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... 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. These people tend to be highly productive. In 2006, foreign nationals residing in the U.S. were listed as inventors on 25.6% of the patent applications filed in the U.S., up from 7.6% in 1998. A Council of Graduate Schools survey found that in the fall of 2007, 241,095 non-U.S. citizens were enrolled in graduate programs. Some 55% were in engineering and the biological and physical sciences, compared with only 16% of U.S. citizens. In 2007, more people on temporary visas received doctorates in physical sciences and engineering than U.S. citizens. There is a high correlation between education and incomes, and in today's uncertain economic climate, many wealthy foreigners desire U.S. resident status just as a number in Hong Kong secured residences in Singapore and Canada before the British handover to China in 1997. They rapidly became over a quarter of Vancouver's population, and brought in billions of dollars to buy houses and make other investments. We could benefit from such an influx... new immigrants ... would bring untold billions. The immigrants would also buy consumer goods, pay taxes, and start many new businesses. 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. America's relatively open immigration policy makes this country better off than many other developed lands whose governments also must fund the pensions and health care for growing numbers of retirees. Yet there's still a huge need for more productive and skilled people, both current residents and immigrants, who will produce enough goods and services to provide for their own needs and for those in retirement. Otherwise, entitlement spending eventually will touch off intergenerational warfare. Granting permanent resident status to foreigners who buy houses in this country will curtail a primary driver of the deepening recession and financial crises - excess house inventories and the resulting collapse of prices. Since the people who will buy these houses will tend to have money, education, skills and entrepreneurial talents, they will be substantial assets to America in both the short and long runs." (Mr. LeFrak is chairman and CEO of LeFrak Organization, a real estate builder and developer. Mr. Shilling, an economic consultant and investment adviser, is president of A. Gary Shilling & Co.)

The Good News:  The Homeland Security monitoring apparatus of those issued temporary visas already exists -  and because of terrorism concerns - it actually works!