Back-story: How little known backwater EB-5 program helped save the real estate market
How the sleeping giant EB-5 became a knight in shining armor
Created by Congress in 1990, the Immigrant Investor Program, better known as the EB-5 Visa Program, allows foreign nationals to bypass long waits and obtain green cards in exchange for investing in U.S. job-creating ventures.
All that investors need to be eligible is a $1 million investment into a project that creates 10 U.S. jobs for a period of two years. Applicants can invest half as much money, or just $500,000, through an authorized regional center that develops designated targeted employment areas (TEAs). The project was scarcely used until six years ago, when the agency overseeing the program, the Department of Homeland Security, clarified a rule to allow temporary construction jobs to count toward the job-creation tally. That made it easier for real-estate developers to get in on the program. The program since has contributed $7.3 billion to the United States GDP from 2010-2013. The program is once again up for renewal on September 30, 2015.
The list of projects that have been fueled by EB-5 investments is extensive and includes the construction of hotels, schools, technology centers, and nursing homes across the country. The program has also provided funding for multiple infrastructure projects, such as port expansion in Baltimore, the building of a highway interchange in Southeast Pennsylvania, and most recently, the expansion of affordable housing throughout Miami, Florida which helped save the real estate market.
On a quest to rescue the City of Miami
There is no question that the Florida was one of the worst-hit states in the subprime mortgage crisis. However, as Think Advisor reported, Miami has recently enjoyed an unprecedented real estate renaissance. Prices of land, apartments and construction have been going through the roof. Meanwhile, in the rest of Florida, 18.5% of homeowners remained underwater as of early 2015. What separates Miami from the rest of Florida? Foreign investments and the EB-5 Program.
The City of Miami has started to utilize the EB-5 Visa Program in significant ways within the past few years. The Wall Street Journal reported that last week Miami Mayor Tomas Regalado met with a group of developers and attorneys to discuss upcoming projects for the Miami regional center. The Mayor emphasized that “affordable housing is the number one issue residents contact [my] office about. More than 52,000 people in Miami-Dade County are on the waiting list for publicly-funded affordable housing,” and he believes EB- 5 investments provide a unique opportunity to address the problem.
Job creation will also greatly benefit the City of Miami. The first project funded by the Miami regional center is expected to bring a significant number of jobs to the area, including approximately 1,300 construction jobs. The finished project will have approximately 192 permanent management employees, 800 tenant employees, and 220 visiting students.
Will the EB-5 Program live happily ever after?
As the September 30 expiration date looms for the EB-5 Investor Program, Congress is faced with three choices: keep it, tweak it, or trash it. When previously up for a vote, Congress often chose to “keep it,” voting to temporarily extend the program. This time around Congress will likely extend the program for a few months and eventually “tweak it.” Proposed legislations have been introduced in both the House and the Senate which seek to extend and improve the program. The most tragic decision would be for Congress to “trash it.” CoStar reports that a shutdown would potentially jeopardize an estimated $6.8 billion in foreign investment based on the pipeline of 13,663 pending EB-5 petitions reported by U.S. Citizenship and Immigration Services, and would have a significant impact on job creation.
Perhaps the most clear and resounding reason to “keep” or “tweak” the program is the one provided by Thomas J. Donohue, the Chief Executive Officer of the U.S. Chamber of Commerce, in his op-ed for The Hill: “Smart government policies—backed by facts, data, and statistics—are needed now more than ever to ensure that the United States can compete in the global marketplace to attract foreign capital and help finance projects that put Americans to work.”
So as we longingly wait for our knight in shining armor to return from battle, we can only hope that Congress also wants the real estate market to live happily ever after. Should you require additional information about EB-5, please feel free to contact us.
Real estate attorney and foreclosure defense attorney, Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law along with his wife Ellen in 1989 in Fort Lauderdale, Florida, and is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw and on Facebook.