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COVID-19 & EB-5

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The EB-5 residency-by-investment program funds vital real estate developments countrywide while facilitating green card provisions for foreign investors. Unfortunately, like so many vital programs today, EB-5 faces great challenges in light of COVID-19 related downturns. The program relies heavily on the ongoing creation of new construction projects and the jobs that come with them, both of which are especially intended for Targeted Employment Areas (TEAs). Now, as projects stall and unemployment numbers reach record highs, the program is likewise suffering a sharp slowdown, resulting in less green cards issued and less foreign investment in the American real estate market. 

EB-5 investments are sizable–either $900,000 for TEAs or $1.8 million otherwise, following requisite minimum investment increases. Further, wealthy investors commit to the creation of 10 full-time positions through the new developments. The influx of capital and creation of jobs have allowed the U.S. Citizenship and Immigration (USCIS) program to create jobs without burdening U.S. taxpayers. 

Critics have noted of the program, however, that the jobs it creates and the capital it draws have not not gone to intended TEAs but rather to luxury projects in wealthier, non-rural areas. Despite this, EB-5 does indeed offer significant economic benefits, even having played a vital role in stimulating job growth following the 2008 recession. Unfortunately, the likelihood of that happening in this economic downturn is significantly reduced as immigration has been cut drastically in hopes of combating the spread of COVID-19. Though parts of the approval process can continue remotely, the program simply cannot function without new construction projects and work.

The trend towards funding developments in economically advantaged areas, as opposed to TEAs, poses yet another problem for the program in today’s pandemic. EB-5 investments have increasingly been used to fund developments in high-profile hospitality and commercial office buildings like Related Cos.’s Hudson Yards project. The simple fact that these developments are made with the intention of being filled, either by residents or in-person workers, complicates the willingness of investors to fund them now. With much of the normalcy of day to day life being questioned and reshaped, increasing investor caution and the resultant market downturns are forcing programs like EB-5 to adapt.

What does this mean for the program going forward past its 30-year mark? First, in light of new restrictions on what qualifies as a TEA, more room has been made for small developers and countries with “established networks for developing small amounts of capital” to arrive at development agreements. [1] Second, as developers’ capacity for creating jobs remains stalled, EB-5’s capacity for bringing capital to these developments will similarly stall, posing significant problems for the program’s ability to withstand the economic impact of COVID-19. Lastly, while new developments have effectively stopped, current ones–with foreign investors in the green card approval process–are now on pause with respect to actual construction. As such, foreign investors’ residency remains up in the air as well. Further, with the dual impact of immigration agencies giving preference to K1 visas and recent requisite minimum investment increases slowing the rate of new application filings, the future of the EB-5 program looks uncertain.  

 

Sources:

[1] – McIntyre, Andrew, “3 Ways COVID-19 Is Reshaping The EB-5 Landscape,” Law360, 20 Oct. 2020, https://www.law360.com/realestate/articles/1320447/3-ways-covid-19-is-reshaping-the-eb-5-landscape, Accessed 21 Oct. 2020.

[2] – Jahangiri, Ali, “The EB-5 Visa Program As A Recovery Tool For The U.S. Economy,” Forbes, 28 Aug. 2020, https://www.forbes.com/sites/forbesbusinesscouncil/2020/08/28/the-eb-5-visa-program-as-a-recovery-tool-for-the-us-economy/#31e8f8295248, Accessed 21 Oct. 2020.   

[3] – Zhou, Youyou, “The price of a US ‘golden visa’ just increased to $900,000,” Quartz, 24 Jul. 2019, https://qz.com/1673369/the-us-eb-5-visa-will-soon-cost-900000-not-500000/#:~:text=The%20EB%2D5%20visa%20will,to%20a%20litany%20of%20controversies, Accessed 22 Oct. 2020.

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