How Chinese Real Estate Money is Transforming the San Francisco Bay Area

Nestled inside the Golden Gate Bridge, and up against the northwest shores of the San Francisco Bay, Angel Island offers visitors two snapshots of Chinese arrivals in the United States, taken a century apart. In the early 20th century, Chinese immigrants barred from entering America by the Chinese Exclusion Act were detained and interrogated at the island’s Immigration Station. Those who could prove a blood relation—or convincingly fake one for immigration officers—gained entry to the country. Those who could not were sent back to China. Desperate detainees at the station carved Chinese poems of mourning into the wooden walls of the Immigration Station, etchings that can still be read today.

Twenty-first century Chinese immigrants, homebuyers and real estate investors have received a very different welcome. Looking south from the island’s highest point—past Alcatraz to San Francisco immediately to the south, across the Bay to Oakland, and further south down the peninsula to the suburbs of Silicon Valley—you see cityscapes being transformed by Chinese money. Depending on where you look, very different sources of Chinese money—from developers, to home-buyers, to investors seeking US residency—are transforming these cities in very different ways.

Panning west from Oakland to Treasure Island in the middle of the Bay and then to San Francisco, you catch glimpses of three megaprojects, all in poor neighborhoods and all kickstarted by rich Chinese immigrant investors. The money comes from the federal EB-5 program, which grants green cards to foreign investors and their families (around 80% of them Chinese) who invest $500,000 into a US project that creates ten jobs. On the Oakland waterfront lies Brooklyn Basin, a massive 3,100-unit development on abandoned industrial land that languished for years. Last year the project took on EB-5 funding in order to build basic infrastructure—new roads and plumbing, among others—and this year the developer finally broke ground on construction of the first 250 units.

Pivoting to the middle of the Bay you see Treasure Island, the former home to Navy facilities where $155 million in EB-5 money is being used to fund the infrastructure needed before construction of 8,000 new homes can begin. And pivoting a little further west toward San Francisco you can just make out the edge of the massive San Francisco Shipyards project—12,000 new homes and 5 million square feet of retail and office space planned for San Francisco’s poorest neighborhood—that raised over $300 million from EB-5 investors. These projects all ran into financing problems after the 2008 global financial crisis, with EB-5 money filling the gap when banks shied away from long-term, infrastructure-heavy projects.

Turning toward downtown San Francisco you see a skyline being remade by some of China’s largest property developers. Unlike EB-5 investors—who have little involvement in the project beyond putting up the money—these developers often play an active role in the planning and design of new buildings. Oceanwide—a Chinese developer with $20 billion in assets and a string of US projects from Honolulu to New York—broke ground last December on a downtown skyscraper slated to be the second tallest in the city. Nearby, China’s second-largest property developer, Vanke, and its US partner have nearly finished selling 656 luxury condos in the sleek Lumina towers overlooking the Bay Bridge. In a four-by-six block area downtown, five different Chinese developments are slated to bring well over 1,000 new apartments and condos—many of them luxury units priced well above $1 million—onto the market over the next few years in housing-starved San Francisco.

Finally, if you whip out the binoculars and look even further south down the San Francisco peninsula, you can see Silicon Valley suburbs where an influx of buyers from mainland China are snapping up multimillion dollar homes and paying entirely in cash. Chinese homebuyers recently topped lists of international buyers in the United States for the fourth straight year, spending $31.7 billion last year alone. Forty percent of the homes purchased were in California.

In Palo Alto, my hometown, median home prices have doubled over the last five years to $2.6 million, fueled by a combination of newly-minted tech millionaires and a surge of Chinese buyers. I’ve spoken to local realtors who have described multiple instances where four or five different Chinese buyers, all promising to pay cash, engaged in bidding wars for properties that none of them had seen with their own eyes. The liberal tech town prides itself on embracing diversity and “disruption,” but behind closed doors and on anonymous message boards, some locals instead describe the new Chinese arrivals as unwelcome “invaders,” pricing locals out of their own neighborhoods while “refusing to assimilate.” That backlash against rich, “unassimilable” Chinese buyers driving up home prices makes for a bizarre historical bookend to the last time Chinese drew the ire of Californians—back then for being poor, “unassimilable” laborers who dragged down wages.

None of these three sources of Chinese investment—the EB-5 applicants, the downtown developers, or the suburban homebuyers—are unambiguously good or bad for local residents. EB-5 projects like the San Francisco Shipyards are bringing much-needed jobs to the city’s poorest areas. But the idea of money entitling someone to a green card rubs many Americans the wrong way. Moreover, such projects trigger well-founded fears that the city’s last predominantly black neighborhood will be gentrified out of existence. Chinese-funded skyscrapers downtown primarily cater to millionaire buyers, but middle-class residents are demanding more affordable housing. And Chinese buyers in places like Palo Alto bring international diversity to the area and allow longtime residents to cash out of their homes, but they also contribute to a full-on housing affordability crisis in the South Bay.

All these trends have been under pressure since the end of last year, when Chinese authorities clamped down on the flow of funds abroad in an attempt to prop up their currency and stem a tidal wave of blockbuster investment deals. One EB-5 broker reported a “slowdown, but not a stop” in new investors, but brokers are nonetheless hoping restrictions loosen soon, maybe after the Chinese Communist Party’s 19th Party Congress this fall. But even if controls are lifted, overwhelming demand from Chinese applicants has led to a massive backlog and multi-year waits in the processing of EB-5 visas. And the parameters of the program itself could change dramatically as the result of competing reform proposals being debated in Congress. Those reforms could target several areas: better funneling investment toward high-unemployment and rural regions, stamping out fraud by unsavory fund managers, and raising the minimum investment level for earning a green card. Given the delays in approvals and legislative uncertainty, projects currently underway should not bank on the ready availability of EB-5 financing down the road.

Chinese developers operating on US soil face a more mixed picture. Many have sufficient funds overseas to continue business-as-usual. But government campaigns targeting some of the most aggressive players—like Dalian Wanda, which has a $1.2 billion mixed use property underway in Beverly Hills—are forcing the sale or transfer of projects in places like Sydney and Chicago. Similarly, Beijing’s capital restrictions have stymied Chinese homebuyers who don’t already have plush Hong Kong or US bank accounts. One Palo Alto realtor told me that her Chinese clients have begun bringing money over from China in smaller chunks than before, and foregoing cash purchases in favor of taking out mortgages with US banks.

Where do things go from here? The future of capital controls and EB-5 reforms loom large. If the controls ease up, we can expect to see another rash of property development deals, though possibly in smaller projects that are less likely to draw the attention of Chinese regulators. And EB-5 reform that breaks the visa processing logjam would both free up funds for more massive redevelopments and open the door for thousands more immigrant homebuyers.

But even looking at just the projects currently underway—the mega-developments, skyscrapers, and Palo Alto homes—the newest wave of Chinese arrivals have already left an indelible footprint here on Californian soil, one that their predecessors a century ago could hardly have imagined.