Wisconsin Realtors look to be next in line to benefit from Gov. Scott Walker’s “Wisconsin is open for business” vow.
While there has been no shortage of speculation behind what is driving Walker’s proposal to loosen restrictions on land purchases by buyers from outside the U.S., Thomas Larson, vice president of legal and public affairs with the Wisconsin Realtors Association takes some of the credit.
Whether or not more is at play in the land sales provision remains to be seen, but Larson says the organization was made aware of the land-purchasing limitations in state law and “let the governor and other legislators know about it.”
“We want to encourage people to buy property,” Larson says. “It seemed strange to us that we would have a provision in state law that prevents land ownership.”
The provision in current state law prevents an individual from another country from owning land in Wisconsin unless they reside in the state. Walker’s proposal would change that to allow “nonresident alien individuals” to own land in the state.
A separate provision in state law prevents a foreign corporation from owning more than 640 acres of land. Walker’s proposal would change this by removing the acreage cap and allowing foreign corporations and foreign individuals to own unlimited amounts of land for any purpose.
The one exception is farming. Under current state law, foreign corporations cannot farm on land they own. Walker’s proposal does not change that.
“This would benefit people (investors) who are interested in land for other purposes than farming,” Larson says.
A March 4 Economists’ Outlook blog post on the National Association of Realtors website provides a snapshot of the growing purchasing power of international buyers when it comes to residential properties.
According to the post, headlined “International Buyers: A Significant Part of Real Estate Sales,” the National Association of Realtors has estimated residential sales to foreign buyers at $82.5 billion for the 12 months ending in March 2012.
That amounted to roughly 8.8 percent of the total residential market sales last year in the U.S.
When it comes to farmland ownership, holdings in Wisconsin by foreign investors were minimal as of 2010 — just 0.5 percent or a little over 118,000 acres — according to the most recent annual report from the federal Farm Service Agency. But that total had more than doubled over the previous five years, the report showed.
State Sen. Kathleen Vinehout, D-Alma, sees how development pressure, the purchase of land for recreational uses like hunting, and the recent introduction of such industries as frac sand mining have contributed to rising land prices in her largely rural district.
She is concerned that what Walker is proposing will further drive up the cost of farmland — even if the land isn’t used for farming — and subsequently price locals looking to get into the farming business out of the market.
“I’m worried that in Wisconsin we are moving toward an investor-owned rather than a farmer-owned land base,” Vinehout says. “The fear then is that some of the sustainable practices aren’t used on the land because the investors aren’t looking long-term. Instead, these investors look to eek a few more dollars out of the land because it’s being managed by a bank for an investor somewhere else.”
A Wisconsin Farmers Union memo concludes that the budget proposal would constitute a “significant change” to existing law regarding foreign ownership of land in Wisconsin.
“Adding more foreign competition for land ownership in the state, and in particular, tax-preferred agricultural land, would drive up land prices and edge some resident landowners out of the market,” reads the memo.
John Peck, executive director of Madison-based Family Farm Defenders, says he made Walker’s proposed changes the topic of discussion for his introductory economics class at Madison Area Technical College this past week. The discussion focused on why a state like Wisconsin is opening up its doors to more foreign investors. The answer is the troubled global economy, Peck says.
The value of land is rising faster than the SP 500 over the past 10 years, says Peck. “If you’re trying to diversity your crappy portfolio, land investment is a good option.”
In a recent Wisconsin State Journal article, Walker spokesman Cullen Werwie said the change is intended solely to clarify language that was confusing to potential foreign investors, specifically that the state’s 125-year-old law conflicts with the international treaty known as GATS, or the General Agreement on Trade and Services.
“This provision is a technical fix for areas of the law that conflict. It has nothing to do with ag, and it has nothing to do with the paper industry,” Werwie said. “If legislators would like to make modifications to the budget proposal related to this specific issue, we’re open to looking at their changes.”
But the Wisconsin Farmers Union challenges the assertion that the change is needed to comply with international law. “Without more evidence of a credible legal challenge to Wisconsin’s current statute, the state rationale of needing the law change in order to comply with federal treaty does not withstand scrutiny,” the group’s memo says.
Peck doesn’t believe the GATS line either. He says Walker and Wisconsin lawmakers are posed to make the state part of a “global land-grabbing casino.”
“The most valuable asset we have is our land, forests and water,” Peck says. “It is shocking to me that we are willing to put everything on the auction block.”