Texas is facing a significant legal challenge over its controversial Senate Bill 17, which prohibits citizens from certain foreign countries from purchasing real estate within the state. Multiple Chinese national plaintiffs filed the suit on July 3, 2025 in the Southern District of Texas, alleging that the sweeping legislation violates constitutional protections and discriminates based on national origin. This landmark case represents one of the most significant legal challenges to state-level foreign property ownership restrictions in recent U.S. history.
The Law Under Challenge
Senate Bill 17 bans people with ties to the governments of China, Iran, North Korea, and Russia from purchasing homes, commercial property, and other types of real estate in Texas. The legislation, which took effect on September 1, 2025, represents one of the most comprehensive foreign ownership restrictions enacted by any U.S. state.
It prohibits real property ownership by the citizens, companies, or organizations of designated foreign adversary nations, such as China, Russia, Iran, and North Korea. The scope of the ban extends beyond individual homebuyers to encompass commercial real estate transactions, making it one of the broadest state-level restrictions on foreign property ownership in the nation.
Effective Sept. 1, 2025, the Act will prohibit the acquisition of interests in real property in Texas by foreign individuals or entities associated with designated countries identified as national security risks. This timing has created urgency among affected individuals and organizations who were in the process of purchasing property when the law took effect.
The Plaintiffs and Their Claims
The lawsuit has been spearheaded by the Chinese American Legal Defense Alliance (CALDA), representing multiple plaintiffs who argue that the law violates their constitutional rights. Plaintiffs include Peng Wang, Qinlin Li, and Yisi Wang. They are all citizens of China who are in the U.S. on visas.
Two Chinese nationals living in Texas say SB 17 is unconstitutional and would block them from housing. The plaintiffs represent a broader class of legal residents who find themselves caught in the legislation’s wide net despite their lawful status in the United States.
The legal challenge centers on several constitutional grounds. The CALDA litigation asserts that SB 17 is unconstitutional and oversteps several federal statutes: The Act “targets plaintiffs… based on their race, ethnicity, color, and national origin,” is enacted with the intent to discriminate and is neither narrowly tailored nor justified by compelling state interests.
Two Chinese nationals living in the state filed suit in July, arguing the ban violates constitutional protections and could even criminalize long-term leases. This expansion of the law’s potential impact beyond property purchases to include rental arrangements has raised additional concerns about its scope and enforceability.
Initial Court Proceedings and Setbacks
The legal challenge has faced significant procedural hurdles in its early stages. Overall, the court found that SB 17 does not restrict the plaintiffs from acquiring real property located in Texas, meaning they suffer no injury and lack standing. Accordingly, Judge Eskridge dismissed the case based on the lack of standing claim before reaching the plaintiff’s constitutional arguments.
This dismissal on standing grounds represents a significant setback for the challengers, as it means the court never reached the substantive constitutional questions at the heart of their case. The standing requirement in federal court demands that plaintiffs demonstrate concrete and particularized injuries that are traceable to the defendant’s conduct and likely to be redressed by a favorable decision.
The plaintiffs are seeking a preliminary injunction to prevent enforcement of the law while the case proceeds through the courts. However, the initial dismissal has complicated this strategy and forced the plaintiffs to appeal the standing determination.
Appeal to Federal Circuit Court
Following the district court’s dismissal, the case has moved to the appellate level. Lawsuit Against ‘Texas Foreign Land Ban’ Pending in Federal Court of Appeals, indicating that the constitutional challenge remains alive despite the initial setback.
The Chinese American Legal Defense Alliance (CALDA) hoped to convince the court to prohibit the law’s enforcement before it took effect. While this initial goal was unsuccessful, the appellate process provides another opportunity to challenge both the standing determination and the law’s constitutionality.
The appellate phase will be crucial for determining whether the plaintiffs can establish sufficient legal standing to proceed with their constitutional challenge. If the appeals court reverses the standing determination, it would allow the case to proceed to the merits of the constitutional claims.
Broader Legal and Policy Context
The Texas lawsuit occurs within a broader national context of increasing restrictions on foreign property ownership. CFIUS and SB 17 overlap in the regulation of foreign national ownership of property. However, SB 17 applies to all real property within the state of Texas, while CFIUS enforcement is mostly limited to real estate transactions that have national security implications.
This distinction highlights how state-level legislation like SB 17 goes far beyond existing federal oversight mechanisms, creating a more comprehensive restriction system that affects routine residential and commercial property transactions rather than just those with clear national security implications.
The Legislature has approved a conference committee report that lists sales to certain people from China, North Korea, Russia, and Iran as threats to national security. This national security rationale forms the legal foundation for the legislation, though critics argue that the broad application to all property types goes beyond legitimate security concerns.
Political and Social Ramifications
The legislation and subsequent lawsuit have generated significant political debate within Texas and nationally. Supporters say the new law will make the state more secure, but critics say it’s discriminatory. This divide reflects broader national tensions over foreign influence, national security, and civil rights protections.
During the recent legislative session, the law’s supporters argued it would protect the state against spying and the influence of hostile countries. Proponents frame the legislation as a necessary security measure in an era of heightened international tensions and concerns about foreign influence operations.
However, opponents say the measure is discriminatory and punishes people who are lawful residents of Texas. Critics argue that the law’s broad application affects individuals who have no connection to their home countries’ governments and may have fled those very regimes that the law ostensibly targets.
Impact on Affected Communities
The law’s implementation has created immediate practical challenges for affected individuals and communities. For now, SB 17 remains in effect—leaving international students, homeowners, and investors from the affected nations in legal limbo as the lawsuit moves forward.
This legal uncertainty affects various groups beyond the named plaintiffs, including students studying at Texas universities, professionals working for Texas companies, and long-term residents who may have been planning to purchase homes or invest in local businesses. The law’s broad scope means that legal residents with no ties to their home governments find themselves unable to participate in the Texas real estate market.
The implications extend beyond individual property transactions to affect broader community development and economic investment. Chinese and other foreign nationals have been significant contributors to Texas’s real estate market, and their exclusion could have measurable economic impacts on local markets and communities.
Constitutional Questions at Stake
The lawsuit raises fundamental questions about state authority, federal preemption, and equal protection under the law. The constitutional challenges focus on several key areas: equal protection violations based on national origin, due process concerns about broad and potentially arbitrary restrictions, and questions about whether state legislation in this area conflicts with federal authority over immigration and foreign relations.
The equal protection argument is particularly significant, as courts have historically applied heightened scrutiny to laws that classify individuals based on national origin. If the case proceeds to the merits, courts will need to determine whether the national security rationale provides sufficient justification for what plaintiffs argue is discriminatory treatment.
Federal preemption questions also loom large, as foreign relations and immigration have traditionally been areas of federal rather than state authority. The extent to which states can regulate foreign nationals’ property rights without conflicting with federal policy remains an unsettled area of law.
Economic and Market Implications
The legal challenge takes place against the backdrop of Texas’s significant role in the national real estate market. In 2023, Texas led the nation in homebuilding, responsible for 15% of all new housing permits—well above its share of the U.S. population. This outsized role in national housing production means that restrictions on foreign investment could have impacts beyond state borders.
The uncertainty created by the ongoing litigation may affect foreign investment decisions even beyond the specific countries targeted by the legislation. International investors may view the Texas law and similar measures in other states as signals of broader hostility toward foreign investment in U.S. real estate markets.
Looking Forward: Potential Outcomes and Implications
The outcome of this lawsuit is likely to have far-reaching implications beyond Texas. challenging a new Texas law, known as Senate Bill 17, which restricts citizens from China, Russia, Iran, and North Korea from purchasing or leasing property in the state, represents a test case for similar legislation being considered in other states.
If the constitutional challenge succeeds, it could establish precedents that limit states’ ability to restrict foreign property ownership based on national origin. Conversely, if Texas successfully defends the law, it might encourage other states to adopt similar measures, potentially creating a patchwork of restrictions across the country.
The case also raises important questions about the balance between legitimate national security concerns and constitutional protections for individuals lawfully present in the United States. The resolution of these questions will likely influence future policy debates about foreign investment, immigration, and civil rights.
The lawsuit challenging Texas’s foreign property ownership ban represents a pivotal moment in the intersection of national security policy, constitutional law, and real estate regulation. While the initial district court dismissal on standing grounds has created procedural hurdles for the challengers, the ongoing appellate process ensures that these important constitutional questions remain alive in federal court.
The outcome will have significant implications not only for the thousands of individuals directly affected by the Texas law but also for the broader question of how states can regulate foreign property ownership while respecting constitutional protections and federal authority. As the case proceeds through the federal court system, it will likely serve as a crucial test of the balance between security concerns and civil rights in an era of increasing international tensions and domestic political polarization.
The legal battle over SB 17 ultimately reflects deeper questions about American identity, security, and the rights of foreign nationals in an increasingly globalized but politically divided nation.
