The overwhelming majority of EB-5 funding goes into gerrymandered districts where affluent neighborhoods are combined with high-unemployment areas that qualify for the program, a new study shows.
The study, released Wednesday by the U.S. Government Accountability Office, is the first attempt by the federal government to quantify claims of abuse critics have lobbed at the visas-for-dollars program, which is set to expire in December as lawmakers debate its future.
Conducted over a three-month period last year, the study found that 90 percent of EB-5 funds went to gerrymandered districts made up of two census tracts stitched together, and in some cases more than 100, the Wall Street Journal reported.
EB-5, a low-cost source of financing for developers, allows projects to stitch together areas of low unemployment with affluent neighborhoods, one of the main points of criticism in the debate. The program allows investors to get a green card in exchange for investing at least $500,000 in U.S. businesses that create jobs.
Looking at 200 investor applications received between July and September 2015, the study found that 36 percent of applications were for projects in census tracts with an unemployment rate of 4 percent or lower.
EB-5 requires projects to be in an area with unemployment at 150 percent of the national unemployment rate, which would have been at least 7.6 percent at the time of the study, which found that just 12 percent of applications were for projects in areas with unemployment of at least 8 percent.
With 14,000 investor applications to look at, the report is only a small snapshot of the program and has a high margin of error, the Journal reported.
The program is set to expire in December, and lawmakers have agreed to proposed changes of the unemployment issue. The program may have already lapsed due to a technical oversight by lawmakers, as The Real Deal previously reported. [WSJ] – Rich Bockmann