When the EB-5 visa program debuted in 1992, members of Congress said it would spur job growth and whip up a significant amount of capital investment from overseas. But despite vigorous support from the real estate industry and a largely supportive Congress, opposition against the program continues to mount. Critics have taken aim at Ponzi-style schemes, murky sources of funding, and vague job creation results as reasons to pull the plug on the dollars-for-visas program.
Now, there’s another argument you can toss into that anti-EB-5 political salad: the program is a big, beautiful door through which President Donald Trump can both enrich himself and those around him, according to several New York State Democrats.
State Senators Liz Krueger, Velmanette Montgomery, Roxanne Persaud, and James Sanders, Jr., all of New York City, penned a letter to the New York Congressional Delegation earlier this week calling on Congressional members to vote against renewing the expiring EB-5 program because of past problems of abuse, shoddy job production numbers and potential conflicts of interest with President Trump.
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“We are deeply concerned that the visa approval process will be further corrupted to meet the needs of the Trump Organization and other Trump family ventures,” the letter reads.
Because the Trump-branded (and Jared Kushner-developed) Trump Bay Street in New Jersey benefits from EB-5 dollars, the politicians suggest that President Trump could direct his agencies to show favoritism to foreign investors wanting to contribute to Trump or Trump family projects.
The program is also falling far short of its own stated goals, the New York City officials write. Citing the federal government’s own report from October, only 12 percent of EB-5 investment goes to areas with at least eight percent unemployment, a problem that has been exacerbated by “gerrymandering” of the Target Employment Areas (TEAs) that are supposed to bring money into struggling communities.
On top of that, the amount of investment going towards luxury real estate, they argue, will drastically affect real estate values, making affordable housing development more challenging and increasingly the likelihood of tenant displacement.
“The incoming Trump administration has proposed punitive attacks on vulnerable immigrant groups, but has signaled support for the scandal tarred EB-5 Visa Program which benefits only the extremely wealthy” the Senators say.
Proponents of EB-5 nationally argue the opposite, hailing the program as the driving force behind projects of many types and scales that would otherwise would never get built, while also providing work for tens of thousands of people in a given year. Problems involving dirty money and fraud can be solved with federal oversight reforms, supporters say.
Krueger says that’s not going to happen.
“You can’t fix this,” she said an interview with The Real Deal on Thursday, “the whole design has been so bastardized as to not be justified.”
“The whole thing has just started to feel like a Martin Scorsese movie.”
Even if Congress extends the EB-5 program, new rules for its implementation proposed by the Department of Homeland Security could severely weaken it as a major source of real estate investment capital, Angelique Brunner of the EB-5 Investment Coalition told TRD earlier this week.
Brand name New York City developers such as Related Companies, Silverstein Properties, CIM Group and Forest City Ratner have spent big bucks lobbying Congress to reauthorize EB-5. Related Companies, which raised $600 million in EB-5 funds for Hudson Yards, spent over $1.4 million in lobbying for the program since January 2015, the Wall Street Journal reported.
And they count the support of the nation’s most powerful Democrat — New York Senator Chuck Schumer, who has advocated for the program even in cases where it doesn’t appear to directly benefit communities most in need.