New York’s developers are still dealing with the emotional pain of losing the 421a tax abatement program, and now they may have to wave good-bye to another beloved subsidy: EB-5.
A key provision of the visa program, which allows foreigners to invest upwards of $500,000 in U.S. real estate projects in return for a green card, is set to expire Sept. 30. Although Congress could temporarily extend the program until after the November election, the program’s future remains in limbo.
The program was last set to expire last September, but lawmakers kept it afloat with stopgap bills.
EB-5 investors are a popular source of (relatively) cheap cash for New York’s developers, and have helped fund major projects like Related Companies’ Hudson Yards. Reformers headed by Iowa Sen. Chuck Grassley want to bar condo projects in high-income neighborhoods from receiving EB-5 funds, which are in theory intended to support underdeveloped areas in the suburbs or rural America. But New York Sen. Chuck Schumer heads a group opposing such changes, creating a stalemate.
Last month, Virginia Congressman Bob Goodlatte sponsored a bill that would severely restrict developers’ ability to tap into EB-5 funds by raising the minimum individual investment. As The Real Deal reported, the proposed bill would require the minimum investment for EB-5 applicants be $800,000 in high-unemployment areas. In areas with low unemployment, the investment amount would rise from $1 million to $1.2 million. The bill would apply retroactively to all applications filed by investors from June 2015.
Many believe it would effectively kill the EB-5 program in Manhattan.
In 2016, the program has lost popularity among investors for the first time in years. A total of 8,638 foreign investors applied for EB-5 visas in the first nine months of the fiscal year, on pace for an annual drop from the 14,373 applications recorded in the entire prior fiscal year. Possible explanations are uncertainty over the program’s future and long wait lists. [WSJ] — Konrad Putzier