The EB-5 Funding Fight Is Far From Over. Here’s Why.

Last month, members of Congress haggled over the EB-5 visa program up until the 11th hour, but an agreement couldn't be reached, leaving the program extended—as is—until Sept. 30, 2016.

Members of Congress have been calling for reform, putting them at odds with many developers. So what does this extension mean? Have developers won? Let's take a look at the program and explore what the future could hold.

EB-5, which gives visas to foreign investors who contribute at least $500k toward US developments that create at least 10 local jobs, has been praised for stimulating local economies and promoting job growth without costing American taxpayers one red cent. On the flip side, it's also been criticized for having many loopholes, opening the door for fraud and creative bookkeeping.

Funding from the program has been a big contributor to projects like Related's Hudson Yards and Forest City Ratner's Atlantic Yards/Pacific Park in New York, the Wharf in Washington, DC, and Hunters Point Shipyard in San Francisco.

The concerns aren't exactly unfounded. In one case, a man fraudulently raised $160M from 300 Chinese investors, siphoning profits for personal use.

In another, in Vermont, roughly 20 early investors sank money into the Jay Peak Resort, a $250M community developed by CEO Bill Stenger. The community has three hotels, an indoor water park, an ice skating rink, a conference center, wedding facilities, a spa and restaurants.

However, Stenger seized ownership of the development's Tram Haus Lodge and turned the investments into IOUs—allegedly without the investors' knowledge. He then dissolved the company and now the investors are worried they may never see a return on their investment (beyond receiving visas).

In another example, Chicago's Kyoto Protocol Centre—in what was supposed to be the World's First Carbon Platinum LEED-certified and 100% Allergen Free convention center and hotel—raised $147M from about 300 Chinese investors. The project claimed it would create 8,000 jobs, but the complex was never built.

Sens. Chuck Grassley and Patrick Leahy say the program needs more accountability to avoid fraud and tighter qualifications for a TEA (Target Employment Area), because the program is funding too many major projects in big cities and not enough rural projects—the original purpose of the program.

And then some just find the program unethical. Developer and former New York Governor Eliot Spitzer says the program rubs him the wrong way while Sen. Dianne Feinstein says it gives the impression that "American citizenship is for sale."

Now that the program has been extended, it looks like it's back to the drawing board. If Congress couldn't reach an agreement before, will they be able to reach one by the September deadline?

The bill that came close to passing last month would have extended the program for five years while raising the minimum investment threshold from $500k to $800k.

The added capital requirement likely wouldn't have deterred investors, let alone developers. In fact, it would have meant up to 60% more capital for each project since the visa limit would have remained at 10,000 per year.

The definition of a TEA would have become stricter, however, and there would have been a requirement for direct jobs to make up at least 10% of the job creation.

There's no way of knowing if September's bill will be similar, but the key point is that developers will probably win, even if there is reform. What may hurt developers, however, is this period of purgatory up until the ruling.

For the time being, investors might not be so eager to plunk down change with so few guarantees for the future. And then there's still the question of whether policy changes will be retroactive, making things even more uncertain.

But, the extension gives developers and investors a chance to get in while they still can, so we could see a surge of investment, as people clamor to be the first 10,000 to get Green Cards. Overall, it seems the extension is more positive than negative for developers, but who knows? We'll all just have to wait and see.