In 1990, Congress created the investor visa green card program to bring entrepreneurial talent to the United States, create new jobs and infuse new capital into our economy, especially in hard-hit rural and depressed areas. Unfortunately, over the years this program — known as the EB-5 program — has strayed further and further from congressional intent and has been repeatedly tarnished by scandal and political favoritism.
For the past three years, we have worked in good faith to reform the EB-5 program and set it on a solid foundation. Unfortunately, a breakthrough compromise was scuttled by moneyed New York City interests despite having the support of most of the EB-5 industry. As a result, reforms were not included in the recent omnibus and the program continues to operate in its current dysfunctional form.
At the end of the last administration and with our urging, the Department of Homeland Security issued proposed regulations delivering long-overdue EB-5 reform. We congratulated DHS for a job well done. These proposed regulations are a valuable first step that would curtail abuse in the program and bolster job creation and economic growth in rural and distressed areas.
As two steadfast conservative Republicans, we strongly believe that Homeland Security Secretary Kirstjen Nielsen should quickly finalize these reforms. Here’s why.
Under the current EB-5 program, a foreign national can apply for a green card — which allows permanent residence leading to eventual citizenship — if they invest at least $1 million in an American business and create 10 jobs. However, foreign nationals need only invest $500,000 if projects are located in rural or high-unemployment areas. Congress intended this lower investment tier to provide a strong incentive for investment in rural and depressed areas that struggle to attract capital.
The minimum investment amounts have not been increased in the nearly three decades since the program’s inception, reducing the real value of each investment by roughly half. Nearly all EB-5 visas now go to foreign nationals, mostly from China, investing at the $500,000 level meant for rural and poor areas even though the projects are almost always in affluent urban hubs.
Regional centers, some effectively run by the Chinese communist government, have learned that they can get away with “gerrymandering” their project maps. They build luxury condos in midtown Manhattan and other affluent areas and still get credit for revitalizing high-unemployment areas. They do this by stitching together ritzy high-rent districts with depressed zones miles away. They can then market their projects to foreign nationals for $500,000.
In this way, the EB-5 program has morphed into a boondoggle for wealthy, well-connected, big-city developers. They essentially sell citizenship to foreign nationals not for public benefit, but to give themselves a cheap source of capital and a higher profit margin for projects that would have been built anyway. All the while, rural and struggling areas are once again left in the dust.
For example, Hudson Yards, a Manhattan mega-development, marketed investor visas at the lower tier. At its first condominium project, condos were reportedly going for $1.9 million to $32 million. Hudson Yards purchased a four-page spread in Vogue to advertise its condos, boasting that it would include “some of the tallest and grandest towers in the city” with a “unique combination of luxury retailers,” “independent boutiques” and an “innovative luxury spa.” It’s laughable to consider some of the nation’s richest ZIP codes as distressed areas and it’s a travesty that this capital was not injected into the rural and urban distressed communities that needed it the most.
DHS’ proposed regulations would address many of the problems plaguing the EB-5 program. They would raise the minimum investment amount to $1.8 million for standard projects and $1.35 million for rural and high unemployment areas. These increases simply make up for inflation over the past quarter century.
The regulations would bring to an end the regional center gerrymandering. To be considered a high-unemployment investment area, a project would have to be actually located in a census tract that has a high-unemployment rate or touches such a tract.
While we have been outspoken about unconstitutional executive overreach by the Obama administration, these regulations are the poster child for how an administration should regulate. It was Congress itself that gave the Executive Branch explicit authority to raise the minimum investment amounts, determine which areas qualify as depressed and make the other reforms contained in the draft regulations.
We urge Secretary Nielsen to finalize these regulations. President Trump rightly campaigned on restoring integrity to our immigration system and creating jobs for American workers. Finalizing the regulations will help deliver on these campaign promises, and it will ensure that the EB-5 program works as intended to boost our economy and create jobs here at home.
• Bob Goodlatte, a Republican U.S. representative from Virginia, is chairman of the House Judiciary Committee. Chuck Grassley, a Republican U.S. senator from Iowa, is chairman of the Senate Judiciary Committee.
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