EB-5 reforms, update

Selling green cards to foreigners in exchange of their investing in building projects in areas needing investment has been dominated by real estate developers who use tortured rationales to build in affluent areas, and sometimes mis-appropriate the funds. This is a good case of an obscure government program captured by vested interests, including the President’s relatives. Reforms that have been sought are years are likely to be killed this winter.

The EB-5 program, first introduced in the early 1990s, provides green cards to foreigners who invest in the U.S. The program has incurred big scandals in the past few years. They include a $84 million dollar fraud in Vermont due to negligent state oversight (Jay Peak), a $40 million scandal in Miami (Palm House), and the Kushner family abuse of EB-F in some New Jersey projects for affluent condo buyers.

A team of researchers at NYU’s Stern School of Business closely tracks this program. Dem Senator Leahy and Rep Senator Grassley have been pushing for reforms, and in 2019 the two introduced a reform bill in June. Republican senators Graham, Cronyn, and Rounds are attempting to avoid he reforms through their own bill.

Reformers (such at the NYU team) focus on three issues: increasing the threshold of investment, strengthening incentives for investments to be in targeted areas (rural, urban distressed neighborhoods), and greater transparency to prevent diversion of funds by better management of regional EB-5 Centers.

A summary comparison of the proposed reforms and the counter-attack is here.

This 2015 Forbes article shows how threat of reforms spur demand by foreign investors.





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