A proposed Chinese-owned land purchase near Grand Forks Air Force Base helped put foreign farmland ownership at the center of North Dakota’s policy debate. In 2023, the state responded with a law restricting foreign businesses and governments from certain countries from owning property.
North Dakota was not alone. Since 2021, states across the country have moved to restrict foreign ownership of farmland, real estate or property near sensitive sites.
Now, new research suggests those restrictions may come with a farmland value trade-off.
Nicholas Orlando, research specialist at the Challey Institute for Global Innovation and Growth at North Dakota State University, studied older state laws restricting foreign ownership of agricultural land and found they were associated with lower land prices. In states with outright foreign ownership bans, the estimated decline was about $1,000 per acre. In states with acreage restrictions, the decline was closer to $500 per acre in the main model.
“Even though these laws are for national security concerns, and they have good intentions, like a lot of laws, you don’t really know what the unintended side effects might be,” Orlando says.
Fewer buyers can mean lower prices
Orlando explains the price effect through basic supply and demand. Farmland supply is relatively fixed in the short run, so removing a group of potential buyers changes the demand side of the market.
“When you have a restriction on land ownership, that represents a drop in demand,” Orlando says. “You’re holding the supply curve constant, demand drops, and that can cause a reduction in the price.”
That price response matters because land is often a farmer’s largest asset. Lower land values can affect balance sheets, collateral, borrowing capacity and long-term wealth, even if day-to-day farm operations do not immediately change.
Outright bans showed the largest effect
Orlando studied two categories of state laws from the late 1970s and early 1980s: outright bans on foreign ownership of agricultural land and acreage restrictions that allowed foreign ownership but capped how much land could be owned. The No Foreign Ownership states in the study were Minnesota, Missouri and Iowa. The acreage restriction states were North Dakota, South Dakota, Pennsylvania and Wisconsin.
The price effects differed by law type, with outright bans showing a larger estimated decline than acreage caps. Orlando’s main model found No Foreign Ownership restrictions were associated with about a $1,008-per-acre reduction in agricultural land values, while acreage restrictions were associated with a smaller reduction of about $537 per acre.
A separate panel-data robustness check also found a negative effect for both types of restrictions, though only the No Foreign Ownership result was statistically significant in that model.
Productivity did not show the same clear decline
While land prices declined in the study, agricultural productivity did not show the same clear response.
Orlando used USDA Economic Research Service total factor productivity data, which measures output growth beyond input growth. In the main models, neither No Foreign Ownership restrictions nor acreage restrictions had a statistically significant effect on productivity.
One possible reason is the difference between land ownership and land operation. A restriction on who can own the land does not necessarily change who farms it, what crops are planted, how inputs are used or how quickly technology is adopted.
“Those who work the land are not always the same as those who own it,” Orlando’s study notes. “Because these laws do not directly affect farm inputs or operational decisions, productivity may be largely unaffected.”
Productivity changes also may take longer to appear, while land prices can react quickly to changes in buyer demand or investor expectations.
How the study isolated the policy effect
To examine the laws, Orlando used a staggered difference-in-differences model, a method that compares states that adopted restrictions with states that did not, while accounting for the fact that different states passed laws in different years.
The study used state-level data from 1960 to 2015. Land price data came from USDA’s National Agricultural Statistics Service, and productivity data came from USDA-ERS. Orlando also used panel-data models as a robustness check.
That long study period allowed him to examine effects over decades, rather than only in the years immediately after a law passed.
Today’s laws are different
Orlando cautions that the older laws he studied are not identical to the new laws being debated and passed today.
Many older laws applied broadly to foreign persons or entities and focused specifically on agricultural land. Newer laws often target foreign adversaries or countries of concern, including China, Russia, Iran, Cuba, North Korea and Venezuela. But some also apply beyond farmland to real property, natural resources or land near military installations and critical infrastructure.
“They’re a little narrower in who they’re targeting, but they’re broader in the different property types,” Orlando says.
Because today’s laws are still new, Orlando says their effects are not yet settled. But his research suggests there could be price pressure in markets subject to ownership restrictions.
“We can’t predict the future right now,” he says. “But my research opens the possibility that there could be price drops in these sectors that are subjected to these restrictions.”
More research is needed
Orlando says the study has limitations, and future research could sharpen the picture.
One limitation is that the study uses state-level data. Because the laws were passed at the state level, Orlando says that approach was appropriate, but it may mask local or county-level differences.
Another limitation is the land price data. The study relies on self-reported USDA land value estimates, rather than actual transaction-level sales data.
Orlando says future research using actual transaction-level sales data could help confirm whether the same price effects appear in recorded land sales.
He also says future work could look beyond broad total factor productivity measures and examine more specific economic indicators, such as agricultural output, ag GDP, transaction volume, buyer composition or local credit market effects.
The policy question: what trade-off is acceptable?
The latest wave of foreign land ownership laws has largely been framed around national security. Orlando says that concern is legitimate, but his study suggests the economic side of the debate should not be overlooked.
For farmers, landowners and appraisers, the research raises questions about whether restrictions could affect land values in certain states or markets. For policymakers, it adds a new consideration as states continue to write, amend and expand foreign ownership laws.
“It’s important for the conversation to weigh the different trade-offs from any given policy,” Orlando says, “and just consider what the unintended consequences might be.”
