Chinese citizens sue over Texas law banning them from buying real estate

AUSTIN (KXAN) — Three Chinese citizens with ties to Texas filed a class action lawsuit Tuesday at the U.S. District Court in Austin to challenge the constitutionality of a new state law, which they claim discriminates against them in renting, owning, buying and investing in Texas real estate.

The lawsuit names Texas Attorney General Ken Paxton as the defendant. KXAN reached out to his office for comment, and we’ll update the story when we hear back.

“[Plaintiffs] will be unable to rent (and therefore continue to live, study, and work) in Texas, and unable to purchase second homes or investment properties,” the lawsuit states. “The law stigmatizes them and their communities, and casts a cloud of suspicion over anyone of Chinese descent who seeks to buy property in Texas.”

The specific law is 2025’s Senate Bill 17, which went into effect Sept. 1. It prohibits real property ownership by the citizens, companies or organizations of designated foreign adversary nations, such as China, Russia, Iran and North Korea.

One of the plaintiffs is a Baylor University sophomore, legally present in the U.S. under an F-1 visa, who rents an apartment in Waco. Under SB 17, nationals from the designated countries can’t enter leases that last for a year or more.

“While leases under a year exist in the Waco area, having to choose from a property that offers a less-than-one-year lease limits his options and increases the potential rent. Most landlords prefer longer term leases,” the lawsuit states.

Entities and people subject to SB 17, such as the other two plaintiffs, will be made to sell properties and divest from the state’s real estate market. Going forward, foreign citizens of designated nations who acquire real property in Texas would face a state jail felony charge, while companies and groups face fines of half the property’s market value.

Chinese buyers spent $13.6 billion on U.S. real estate between April 2022 and March 2023, accounting for approximately 13% of total foreign purchases, according to the National Association of Realtors.

In the lawsuit, the plaintiffs’ attorneys specifically argue that the law violates Article VI of the U.S. Constitution, commonly known as the Supremacy Clause.

“[SB 17] regulates a field exclusively occupied by the federal government, specifically, the intersection between foreign affairs, national security, and foreign investment, including foreign real estate acquisitions,” the lawsuit states.

While executive orders aren’t binding laws, SB 17 may also fall afoul of President Donald Trump’s Feb. 12 order titled “One Voice for America’s Foreign Relations.” It states that Article II of the U.S. Constitution “vests the power to conduct foreign policy in the President of the United States.”

While “one voice doctrine” has been the subject of national debate and Supreme Court cases for generations, the incongruence between the Republican majority in Texas and Trump is an interesting note to the situation.