Washington - The original plan was to attract foreign investment to
blighted neighbourhoods. But instead, the controversial EB-5 investor visa
enabled affluent Chinese to park their cash in high-end real estate in Beverly Hills and Manhattan
benefiting developers such as Donald Trump and his son-in-law, Jared Kushner.
Now the visas criticized as "green cards feor
cash" face a questionable future, with some members of Congress refusing
to reauthorize the program, which expires Friday, unless there is significant
reform.
Proponents of the program argue that the investor visas
provide capital for economic development. Critics say it encourages a two-tier
immigration system favouring the rich over those fleeing wars, persecution and
poverty.
"These are wealthy investors whose main goal is to
secure the visa as quickly as possible," said Gary Friedland, an
investments and capital markets scholar in residence at New York University
whose research focuses on EB-5 capital. "The way to do that is to invest
in the safest projects that are most likely to be completed in the shortest
period of time."
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Some lawmakers, as well as the White House, say lax
government oversight has resulted in a visa program that's rife with abuse.
Sen. Charles Grassley, R-Iowa, chairman of the Senate Judiciary
Committee, and Sen. Patrick Leahy, Vt.,
a former ranking Democrat on the panel, have proposed reforms, along with their
counterparts in the House. So, too, has the Department of Homeland Security.
Some members of Congress have threatened to let the program
expire in its current form on Friday if their colleagues do not agree to
immediate changes.
Industry observers say the program is likely to be
reauthorized under a short-term budget bill, separate from large-scale
immigration reforms being hashed out with industry and the Trump
administration.
The deadline presents a tricky political test for President
Donald Trump. Both he and Kushner, a senior adviser to the president, have
benefited directly from the visa program. Trump, who last week signed an
executive order calling for an overhaul of high-skilled worker visas, has not
spoken out much on EB-5 visas.
"It's a third-rail issue for the White House. They
don't want to be seen as obstructionists to reform," said William Cook,
former general counsel of the US Immigration and Naturalisation Services in
the George H.W. Bush administration when the EB-5 program was created. His law
practice, Global Migration Law Group, represents foreign investors.
The White House issued a statement to The Washington Post
this week saying that the Trump administration is weighing reforms to the
foreign investor visa program.
"There are serious concerns held by the administration
regarding the EB-5 visa program, in part because it is not being used as it was
primarily intended," said Michael Short, a White House spokesman.
"The administration is continuing to evaluate reforms
to the program, which we believe is in need of substantial repair." Congress
created the EB-5 citizenship pathway in 1990 as a way to provide jobs during a
recession.
The guidelines require aspiring immigrants to invest $1
million in a new business anywhere in the country that would create at least 10
full-time jobs or put $500 000 into projects in needy areas, such as rural or
urban communities with unemployment rates well above the national average. In
exchange, the investor and immediate family members receive two-year
conditional green cards.
The law does not define economically needy areas, and
developers often draw the boundaries, resulting in "gerrymandered"
areas in which their projects are located in affluent communities, researchers
said.
This is how the Beverly Hills Waldorf Astoria ended up as an
EB-5-funded project, with $150 million in foreign investment by 300 investors
at $500 000 each, according to a report by Friedland for NYU Stern's Centre for
Real Estate Finance Research.
It's also how Trump
Bay Street, a 50-story luxury apartment complex
built by Kushner Cos. in Jersey City,
was financed, according to a 2016 Bloomberg News report. A quarter of that project's
funding $50 million came from EB-5
investors.
"The original intent was to establish an incentive for
immigrants to invest in areas that can't otherwise attract conventional
capital," Friedland said. "Instead, virtually all projects qualify.
It's merely serving to enhance the returns for those developers."
About 99 percent of the visa holders invested only $500 000 and
only a tiny fraction of projects, 3 percent, were in rural communities,
according to Rebecca Gambler, director of homeland security and justice issues
at the Government Accountability Office.
About 10 000 EB-5 visas are issued each year; 85 percent go
to Chinese nationals, according to federal data compiled by Invest in the USA, an EB-5
trade association.
The foreign investment dollars are concentrated most heavily
in California, New York
and Florida,
according to a Commerce Department report in January.The bill from Grassley and Leahy proposes raising the
minimum investment to $800 000.
A portion of EB-5 visas would be reserved for rural areas.
And the bill would impose stricter criteria for defining needy areas. But some
industry representatives say the changes would hurt projects already underway.
Washington
has benefited from more than $250 million in EB-5 investments since 2011, said
Angel Brunner, founder and president of EB5 Capital, which connects investors
with development projects in 10 states plus the District.
More than half of that money has gone into the NoMa
neighbourhood north of Union Station, she said, where previously there was
nothing but warehouses lining railroad tracks. An REI flagship store has sprung
from the former Uline Arena."None of these projects would qualify under the
proposed changes," Brunner said.
WASHINGTON POST