President Biden declared in his inaugural Congressional address that his administration will spend upwards of $2 trillion to upgrade America’s roads, public transit and broadband. He would cover the tab by raising taxes on the highest earners, a prospect Republicans are adamantly opposed to. One way to help break the stalemate on funding could be through a little-known immigration program: the EB-5 visa — referred to as the investor visa.
The EB-5 was created in 1990 to spur foreign investment in the United States. Under the original terms, immigrant investors who placed $1 million in a U.S. business that led to the creation or preservation of at least 10 jobs could qualify for legal permanent residency. If the projects were based in rural or high unemployment regions — targeted employment areas (TEAs) — investors only had to pony up $500,000.
Uptake was slow at first, so in 1992 Congress passed a bill creating regional centers, which allow investors to pool their money to invest in projects. The program grew exponentially when bank loans dried up in the aftermath of the Great Recession. There are almost 700 regional centers across the country and, during the past decade, demand for the EB-5 has frequently outstripped the 10,000 annual cap of visas.
The visa has created tens of thousands of jobs, but it has also been plagued by scandal. A major development project in Vermont funded with EB-5 money turned out to be a Ponzi scheme. Even when the foreign cash was invested in reputable projects, most of that funding didn’t land in high-poverty rural areas. Perhaps the most infamous example is how the Related Companies tapped the EB-5 for more than $1 billion in funding for the Hudson Yards development in New York City. Foreign investors only had to put $500,000 into the project because a creatively gerrymandered TEA cut through Central Park to encompass public housing complexes in Harlem.
These stories spurred the federal government to make changes in late 2019. TEAs can no longer be fashioned in such a lopsided manner, and investors now have to invest more money to qualify. Even with those reforms, the visa could soon disappear entirely. Authorization for the EB-5 regional centers lasts only through June 30, and it is far from clear that Congress will pass legislation to renew it.
What would make more sense than scrapping the program is reconfiguring it so the benefits accrue directly to the federal government. EB-5 applicants — a number of whom are Latin American investors relocating to South Florida — put money into refurbishing hotels not because they expect to see much of a return on their investment but because it can lead to a green card. That’s a perk the federal government is bestowing. Now that the Biden administration is serious about breaking ground on projects, it makes sense for the government to directly tap the cheap foreign financing it incentivizes through our immigration policies.
The government could sweeten the terms for investors who give to its infrastructure initiatives. The minimum investment could be lower. Applicants could receive a return on only half of their investment, allowing the government access to funds they wouldn’t have to pay back. Because so many of the EB-5 investors are Chinese nationals and each country faces visa caps every year, Chinese applicants are looking at wait times for a green card that can stretch beyond a decade. The federal government could stipulate that people who invest in federal infrastructure projects would receive lawful permanent residency in a more-expedited fashion. And they could raise the number of available visas above the 10,000 a year threshold, so as to potentially access more capital.
Fashioning the program in this manner would make it a more explicit cash-for-visa enterprise. That could raise hackles on Capitol Hill, which would have to approve these changes. Still, the consequences of decrepit roads and bridges, poorly financed mass transit and aging drinking water and wastewater systems are mounting. Reforming the EB-5 could be part of funding a much needed and costly infrastructure upgrade.
Alexandra Starr, a journalist who writes on immigration and Latin America, is the author of a Council on Foreign Relations Special Report about Latino immigrant Entrepreneurship.