Real Estate Ownership Laws | National Security | Politics

Introduction: What’s Going On

On June 20, 2025, Texas Governor Greg Abbott signed Senate Bill 17 (SB 17) into law. (duanemorris.com) Under this law, certain foreign nationals and entities — specifically those from countries designated as “national security risks” (initially China, Iran, North Korea, and Russia) — are prohibited from acquiring most types of real property in Texas, including farmland, residential, industrial, and commercial property. Leases longer than one year are also restricted. (texasstandard.org)

The law excludes U.S. citizens and lawful permanent residents. Some exceptions are also provided — for example, those foreign nationals who are lawfully present and reside in the U.S. may be allowed to purchase a home for use as a homestead.

SB 17 officially takes effect on September 1, 2025. (duanemorris.com)

Who’s Challenging the Law & Their Claims

Three Chinese‐citizens living in Texas — Peng Wang, Qinlin Li, and (formerly) a third plaintiff — filed a federal lawsuit on July 3, 2025 via the Chinese American Legal Defense Alliance (CALDA) to block enforcement of SB 17. (Bloomberg Law)

They argue that the law is:

• Discriminatory on the basis of nationality (and implicitly, national origin and associatively race/ethnicity), violating the Equal Protection Clause of the U.S. Constitution. (duanemorris.com)
• Vague in its definitions (e.g. what “domiciled in a designated country” means), raising due process concerns. (Mondaq)
• Preempted by federal law (i.e. federal authority over foreign investment, national security, etc.) and incompatible with the Fair Housing Act. (Mondaq)

They seek a declaration that SB 17 is unconstitutional and an injunction barring its enforcement. They also aim to have it certified as a class action to represent all similarly situated foreign nationals affected by the law. (Bloomberg Law)

Key Provisions & Penalties Under SB 17

• Covers acquisition of “interests in real property” by natural persons, companies, or entities tied to citizens of the designated countries. (duanemorris.com)
• Includes farmland, commercial, residential property, improvements, water rights, minerals in place, etc.
• Leases for more than one year are banned for such individuals/entities. Leases under one year are exempt.
• Violations carry both civil and criminal penalties. For individuals, penalties can include state jail felonies (up to two years) and fines (e.g. up to $10,000). For companies/organizations, statutory penalties can run higher (e.g. fines up to $250,000 or half the value of the property involved). (duanemorris.com)

Procedural History & Court’s Response

• The plaintiffs sought a preliminary injunction to block SB 17 prior to its effective date. (South China Morning Post)
• The U.S. District Court for the Southern District of Texas dismissed the case in August 2025, ruling that at least in part, the plaintiffs lacked legal standing to challenge the law. (South China Morning Post)
• The plaintiffs have since appealed, and oral arguments before a higher court (the appeal) are scheduled for early November. (South China Morning Post)

Legal Issues & Constitutional Questions

Here are the central legal issues likely to decide the fate of SB 17:

Issue	Key Legal Questions
Equal Protection / Discrimination	Does SB 17 discriminate on the basis of nationality or national origin in a way that contravenes the 14th Amendment? Is there a compelling state interest (e.g. national security) that justifies the classification? Is the law narrowly tailored to that interest?
Due Process / Vagueness	Are the statutory terms sufficiently clear (e.g. “domiciled in a designated country”, “association”, etc.)? Could people lawfully present in the U.S. but not citizens be unfairly caught by the restrictions?
Preemption & Federal Supremacy	Does SB 17 conflict with federal laws and regulations over foreign investment (including national security review regimes like CFIUS/FIRRMA), or with the federal government’s power to regulate foreign relations? If so, can Texas law stand?
Fair Housing Act	Could the law violate federal housing statutes that bar discriminatory housing practices on basis of race/national origin?
Standing	The plaintiffs must show they are sufficiently harmed (or imminently harmed), that their injuries are traceable to the law, and that a favorable court ruling would redress those injuries. The district court found issues here. (Houston Chronicle)

Arguments Likely From the State

Texas (through the Attorney General’s office) is defending SB 17 on several grounds:

• The law is a matter of state interest in national security, protecting against adversarial foreign influence in land ownership. (texasstandard.org)
• The state may argue that SB 17 targets foreign governments or entities tied to them rather than law‑abiding visa holders, though the text of the statute is less clear. (South China Morning Post)
• Also, the state might argue the law is constitutional under precedents allowing states to regulate property and real estate under their police powers, especially when a state deems such regulation necessary for security. |

Potential Outcomes & Implications

• If the courts strike down SB 17, it could invalidate the law before it takes effect (or require significant rewriting). A successful appeal could force Texas to remove or substantially modify the restrictions.
• If SB 17 is upheld, individuals from the designated countries who are non‑citizens, visa holders, etc., could face serious limitations in real estate transactions, including condominiums, long‑term leases, farmland, etc. Gross penalties might also be enforced in some cases.
• A ruling could set precedent — possibly influencing similar laws in other states which have or are considering foreign land ownership bans. (Mondaq)
• Beyond legal risk, there are social, diplomatic, and economic consequences: accusations of discrimination, chilling effect on immigrants, effect on foreign investment, and potential challenges under federal law or even international norms.

Broader Context

• Texas is among more than two dozen U.S. states that have passed or proposed laws restricting foreign land ownership in recent years. These laws often cite national security concerns. (South China Morning Post)
• Some of these laws have already been challenged in court; rulings in other states (or appeals) may serve as persuasive precedents.
• Critics compare SB 17 to earlier “alien land laws” in U.S. history, which discriminated against immigrants (especially Asian immigrants) in property rights, many of which were later struck down. (journalofrealestateprofessionals.com)

What’s Next

• The appeal to the U.S. Court of Appeals will be an important stage. February‐November 2025 is expected to bring oral arguments. (South China Morning Post)
• The decision regarding whether the plaintiffs have standing will be critical. If courts hold they lack standing, the case might be dismissed before merits are addressed.
• Evidence and testimony about how the law is being applied and enforced will matter — especially whether visa holders, lawful residents, students, etc., are being directly harmed.
• Comparison with similarly challenged laws in Florida, Arkansas, and elsewhere may influence reasoning (particularly over federal preemption and constitutional protections).

Conclusion

Texas’ SB 17 is a highly controversial statute that sharply restricts property rights of foreign nationals from select “designated countries,” with penalties for violations, effective September 1, 2025. The legal challenge to the law by Chinese nationals in Texas raises deep constitutional questions: about equal protection, discrimination, due process, and the balance of state vs federal power.

How the courts resolve this — particularly around standing and whether the law is narrowly tailored for genuine state interests — will likely determine not just the fate of SB 17, but also the viability of similar laws in other states, and the boundaries of property, immigration, civil rights, and national security law in the U.S.