$500,000 for US Citizenship: How the EB-5 Immigrant Investor Program Works

The EB-5 Immigrant Investor Program, created under the Immigration Act of 1990, allows foreign nationals to obtain a green card by investing money in the United States. Real estate developers in New York have used the project to fund high-profile projects all over the city.

Individuals who invest at least $1,000,000 (or $500,000 in areas with high unemployment and rural areas) can obtain a visa provided their investment creates or preserves at least 10 jobs for U.S. workers (excluding the investor and their family). The program went largely unused after its inception in the 1990s, but over the past few years, interest has been steadily rising. The program reached its capacity of 10,000 visas for the first time in August of last year, though EB-5 still accounts for less than 1 percent of all visas issued annually. In 2014, Chinese investors made up just over 90 percent of individuals granted EB-5 visas, with people from South Korea, Mexico, Vietnam, and India accounting for the rest. 

Photo courtesy of wsj.com
The Knickerbocker Hotel – Photo courtesy of wsj.com
Rendering courtesy of forbes.com
The Hudson Yards – Rendering courtesy of forbes.com

While some EB-5 investors are interested in a particular industry, a lot of them are mostly interested in getting a green card. Since these investors are not necessarily expecting a great return rate on their investment, real estate developers in particular often end up paying much lower interest rates than they would on a traditional loan. According to The Real Deal, the Related Companies currently controls one-third of the EB-5 market, and has raised more than $800 million from approximately 1,600 investors.

Other developers have funneled EB-5 money into a variety of high-profile projects in New York, including Brooklyn’s Barclays Center, The Knickerbocker and Times Square Hotels, the Hudson Yards redevelopment, and 701 Seventh Avenue, a mixed-use tower with a Marriott Edition hotel by Ian Schrager. EB-5 could also play a key role in the New York City administration’s effort to build more affordable housing, since EB-5 funding is less expensive than traditional loans.

Projects like the Hudson Yards redevelopment have caused controversy for taking advantage of loopholes in the EB-5 program rules. For example, private entities like Related Companies have been allowed to become “regional centers” which can pool money from multiple investors and get around the job creation mandate. Regional centers can count “indirect jobs” their projects might create – for example, the Hudson Yards developers could claim that their project is creating jobs at nearby restaurants, which will feed construction workers and eventually residents. Since this rule change went into effect in 1992, 95 percent of EB-5 projects are funded through regional centers and therefore not required to create 10 direct jobs. These projects are also stretching the definition of a “Targeted Employment Area (TEA),” which is supposed to be a rural or low-income area where developers can invest less money in order to qualify for the EB-5 program. The Hudson Yards is in one of the richest areas of New York City, but the project claims it will create jobs in Harlem, a low-income neighborhood, and therefore qualifies as a TEA.

Though developers have relied heavily on EB-5 funding in the past few years, the program must be renewed by Congress every three years, and is up for review in the coming days. Since no one knows how the program will be modified (or if it will even be renewed), investors rushed to file applications for their visas before the end of the summer. This has created aggressive competition and slowed down the administrative process, causing frustration for many and turning off some developers. There are now more investors looking to get into the New York real estate industry than there are opportunities.

Legislators have proposed giving EB-5 a permanent extension, but other changes to the program are expected as well. While New York City developers have been able to work around rules about where developments supported by EB-5 can be built, modifications to the program could put this practice to an end. One Senate bill proposes redefining Target Employment Areas to prevent gerrymandering like what we saw with the Hudson Yards project. The bill would also raise the minimum investment to $800,000 for TEAs and $1,200,000 for other areas.

If you’re interested in learning more about the EB-5 process, or would like to apply yourself, I can guide you through it; let me know or head to the U.S. Citizenship and Immigration Services website.

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