Lawsuits, Jobs And Billions In Real Estate Projects: The Pressure Is On To Revive EB-5

When Congress allowed the EB-5 regional center program to lapse last summer, industry watchers expressed optimism it would be reauthorized in a matter of weeks.

More than six months later, the program still languishes in limbo, and so do the investors attracted to the program before its lapse. The ongoing absence of the program, which facilitates the promise of permanent residency status in the United States to overseas investors who meet specific criteria, has had consequences. 

"You can't just pull out a large piece of the funding suddenly," Behring Cos. CEO Colin Behring told Bisnow. "That can make the whole thing collapse like a Jenga tower." 

Advocates of re-establishing the regional centers haven't given up.

Invest in the USA, the trade association for EB-5 regional centers that has been lobbying to revive the program, hopes the reauthorization will come as part of the Feb. 18 spending bill, according to Executive Director Aaron Grau. 

"There's not a soul on Capitol Hill who has told us that they don't want to get this done," said Grau, a former majority counsel on the U.S. Senate Committee on Health, Education, Labor and Pensions. "Maybe a lot of them say that just because they're sick of us and don't want to deal with this issue anymore. But there is a sense that the reauthorization needs to happen."

Leading the effort to renew the program in Congress last summer were Sens. Chuck Grassley and Patrick Leahy. Their offices didn't respond to requests for comment about the possibility of renewal.

Part of the pressure to revive regional centers is the thousands of investors who are in limbo. As a result of the lapse in the program, U.S. Citizenship and Immigration Services isn't evaluating I-526 applications, which affects foreign buyers who invested their $500K or more into a project before the program ended. 

"Having investors wait that six months has been painful — a high-stress, high-anxiety period for everybody involved," Behring said.

He estimates that there are as many as 40,000 investors affected by the lapse in the program, representing as much as $35B in investment capital and $120B in real estate projects.

Projects have been stalled as a result of this uncertainty. 

"If this goes on too much longer, they're going to want their money back, and there are going to be lawsuits, to say nothing of the cost of the canceled projects and the lost jobs," Grau said. "I don't think this is lost on policymakers."

One reason nothing has happened since June is that the last half of 2021 proved quite distracting for Congress, said Behring, whose company specializes in real estate development and investment. 

"There were a lot of heavy-hitting topics that you wouldn't normally see, such as Build Back Better and all the Covid-related activity," Behring said. "In a more normal world, the $35B or so of EB-5 capital out there would be a big deal, but not as much in a world of trillion-dollar stimuluses."

The EB-5 program has offered a stream of investment dollars for real estate over the years. A 2019 report showed about $11B in capital investment was made through EB-5 regional centers in federal fiscal years 2014 and 2015. Roughly $7B of that total went to the construction sector.

"We're currently seeing various small projects exploring the direct investment route, but to see real economic impact return, we need the regional center program fully operational again," Carrasquillo Law Group Managing Shareholder Rogelio Carrasquillo said.

Carrasquillo posits that to some degree, the EB-5 program has been a victim of its own success in achieving economic development. Disagreement between the large cities and states and the rural regions on how to spread out the investment more evenly has been one of the factors that brought the program to a standstill, he said.

"Unfortunately, the current situation only keeps away investment from all regions and has eroded potential investors’ confidence in the program," Carrasquillo said.

It is possible that the renewal of the program could be further delayed if it becomes a political football in the national argument over immigration, Carrasquillo said, though he added that he doesn't believe it is likely to happen.

"Unfortunately, given the political controversies affecting various aspects of the U.S. immigration policies, overlooking the economic development and job creation aspects of the EB-5 to focus solely on immigration could complicate the renewal process for the program," Carrasquillo said.

Besides a simple reauthorization — if that comes to pass — changes to the program are highly likely, Grau said.

Possible changes could include an upward adjustment in the minimum investment amount, as well as more specificity regarding targeted employment areas and various proposals to make the process more transparent, Grau said.

Raising the minimum is especially likely, according to Grau. For the entire length of the program, nearly 30 years, the minimum investment for an individual was $500K. In 2019, the federal government revised the minimum upward to $900K via regulatory action, citing the inflation that had occurred since the 1990s as the rationale. 

The move was challenged in court, and just before the regional center program expired, a federal district judge struck down the 2019 regulations, asserting that the Department of Homeland Security had no authority to make the changes. 

Regardless of any changes, Grau stressed that the important thing for the program is to reauthorize regional centers. Otherwise, there is a real threat to the idea of encouraging immigrants to invest in the U.S. economy through the promise of resident visas.

"Our inability to get it reauthorized back in June has damaged the program," Grau said. "I think there is a reputation issue now. If the program is renewed soon, that might fade, since there is still a very powerful desire to move to the United States among a lot of people who have those kinds of assets. But they won't wait forever."