The EB-5 program, “Cash for a Visa” – which helped raise more than $ 40 billion for U.S. real estate ventures – is in danger of being scrapped. The program, which funded projects like the Hudson Yards in Manhattan, allows foreign nationals to get a green card if they invest at least $ 900,000 in U.S. projects that create jobs.
U.S. lawmakers are trying to find a way to extend it. Lobbyists say the effort to find a compromise has gained momentum in recent days. The end of the program after nearly 30 years will be a blow to the real estate industry, which relies on green card applications as a cheap source of funding. Entrepreneurs of projects like Pacific Park in Brooklyn relied on that funding to complete the projects.
A fertile ground for fraud
Senators Chuck Gresley and Patrick Leahy have submitted a bill that would ensure tighter regulation on foreign investors and EB-5 investments. Under the bill, a more rigorous reporting of the achievements of these investments will be required. Senators have proposed a five-year extension to the program in areas where it is due to expire at the end of the month, as well as proposing to allow U.S. businesses to withdraw existing money from EB-5 investors.
Gresley warned that he would rather see the show end than see it continue as it is. “Make no mistake, this program cannot continue like this,” he said.
Senate Majority Leader Chuck Schumer opposes the cross-party law. Other industry sources said they would agree to the measures proposed in the law only if there would also be relief for entrepreneurs in raising money.
Fundraising with the help of EB-5 gained momentum in the previous decade. It has fallen slightly in recent years after federal laws raised the minimum investment from 500,000 to 900,000, making it difficult to develop in areas like Midtown Manhattan. An annual restriction on the number of EB-5 visas also led to a build-up of applications that further slowed the program.
To date, the program has been extended as part of the budget transfer to Congress. The Congress leadership would incorporate the extension into legislative packages and warn opponents that it would overthrow the entire law if they objected. This year, Gresley and Leahy managed to change the expiration date so that it expires before the budget is passed.
This dynamic has divided the industry. Real estate developers support the Grassley-Lehi law and want to prevent the risk of the plan expiring. In the long time until the plan is re-approved they will at least be able to manage the existing money of EB-5 investors for a few more years.
Other developers say the program is almost impossible to use anyway since the law raised the minimum to $ 900,000 and deprived states of the ability to prefer such projects in areas with high unemployment. They want to repeal some of these changes and raise the annual minimum number of new EB-5 visas.
“The Grassley-Leahy Act could create an unusable plan,” says Angelique Brunner, CEO of Institution, a commercial real estate investment firm through EB-5 financing. “It would be as harmful as the current form of regulation, if not worse.” It says it has failed to raise EB-5 capital and has not embarked on a new project since the 2019 amendment went into effect.
Meeting for compromise
The program will expire in about two weeks. Recently, Senators Lehi and Shumer held talks with industry representatives, and agreed to try to find a compromise, say two people who attended the meeting.
In the past, mostly Chinese investors tended to use EB-5. Opponents of the plan hope that if the plan is allowed to expire, the caution that both parties show towards China will make it difficult for the effort to reopen it.