The US’s controversially popular EB-5 visa program will continue until at least December after Congress passed a short-term spending bill Wednesday to fund the federal government.
President Barack Obama is expected to sign the bill into law. Legislators now face a December 9 deadline to negotiate the budget and the EB-5 program. The three-month extension was widely anticipated ahead of the November elections.
The EB-5 visa program grants foreign investors as well as their immediate families a green card in exchange for at least a $500,000 investment in locations designated as a targeted employment area (TEA).
This investment must generate or preserve at least 10 jobs, a number difficult for both developers and the government to confirm. The program, which was started in 1990, was little used until the Great Recession, when developers began tapping foreign investors for a cheap source of financing. In 2008, the government granted just 1,258 visas; by contrast, the program hit its 10,000 visa allocation cap in 2014.
Chad Ellsworth, a partner at immigration law firm Fragomen Del Rey, Bernsen & Loewy, said the next US president’s immigration policies will determine the future of EB-5, which most real estate professionals expect to survive despite opposition from several senators.
In a panel at Wednesday’s EisnerAmper private equity real estate conference in New York, he said that while Democratic candidate Hillary Clinton has not commented publicly on the visa program, her comprehensive proposals would be “good for EB-5” and likely fall in line with the Senate’s decision in its next round of negotiations.
By contrast, Republican candidate Donald Trump’s immigration plans are an “open issue” without much clarity on specifics, Ellsworth said. While Trump built his career in real estate and could be sympathetic to the visa program, he has also spoken controversially about immigration on the campaign trail, including his well-known plan to build a wall to keep Mexican immigrants out of the US.
Ellsworth predicted that, regardless of the presidential election’s outcome, the EB-5 program will see a shift in its development focus.
Critics of the program want to change the definition of a TEA to incentivize development in rural and low-income areas, rather than more affluent urban settings. These areas include New York City’s Manhattan, where the program has helped to fund the development of luxury residential towers and Related Companies’ Hudson Yards (pictured), a sprawling mixed-use project on Manhattan’s far west side.
Most legislators largely agree that the government should put more protections against fraud into place to protect investors and the program’s reputation, which has been marred by headlines about investor and developer abuse. Tom Rosenfeld, the president of CanAm Enterprises, which has raised more than $2.5 billion for developers through the EB-5 program, said at Wednesday’s conference that the real estate industry supports such changes.
“The SEC has recognized this as a problem, and frankly we think that’s good,” he said. “The bottom line is, the program’s going to be here.”