The US Congress has extended the EB-5 Regional Center Program until September 30, 2016, without planned modifications.
The program offers permanent residence to applicants investing $500,000 to $1 million in real estate projects which create at least 10 jobs for citizens or permanent residents in the country. The annual cap of 10,000 visas includes applicants as well as their dependent family members.
The minimum investment limit of $1 million is reduced to $500,000 for investors choosing to invest in a rural area or a targeted employment area where the unemployment rate is at least 1.5 times the national average. Most investors opt for the cheaper option and prefer to pool funds through regional centers that then provide funds to real estate developers.
The EB-5 program was extensively criticized in a recent Government Accountability Office report for inadequate oversight, instances of fraud, and lack of proper assessment of the real economic impact of the program on the country’s economy.
Another major area of criticism was ongoing instances of gerrymandering by applicants due to the vague definition of the targeted employment area. The program, which was intended primarily to attract investment into rural areas and urban areas with high unemployment, was used primarily to fund luxury real estate projects in high-end urban areas. This was done by selective and arbitrary expansion of the boundaries of targeted areas.
While the re-approval of the program was a given, the complete absence of reforms has come as a major disappointment even for those supporting the investment immigration program.
The compromise bill, which was widely expected to be passed, incorporated numerous changes and reforms to the program.
Lawmakers were expected to incorporate the California definition of targeted employment areas, which restricts such areas to not more than 12 contiguous census tracts with the mandated unemployment rate of 150% of the national average. Further, the minimum investment limit was to be increased from $500,000 to $800,000. These changes were intended to shift the program’s emphasis back to its originally-intended target areas
Other proposed changes included imposition of a filing fee of $10,000 per investor for funding increased oversight and monitoring of the program.
The reforms fell through over a debate to include a provision allocating 2,000 EB-5 visas to rural areas, 2,000 visas to impoverished urban areas, and another 2,000 visas specifically for non-targeted areas where the minimum investment requirement is $1 million. This proposal meant that only 4,000 visas would be available for real estate projects in urban areas.
The program is very popular among developers because it offers affordable funding for high-end projects. Investors also prefer this option as it is a safer bet as compared to investing in projects in rural areas.
However a lack of consensus on this proposal resulted in another ten-month extension to the program without any changes or reforms.
Critics have called the extension as an inexcusable deferment of imperative reforms. Even national trade groups supporting the program rued the lost opportunity of a long-term extension of a reformed program.
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