Chuck Schumer continues to defend the use of EB-5 capital to fund luxury Manhattan towers even as pressure mounts in Washington to amend the program to direct more investment to struggling rural or urban areas with low employment.
Speaking Wednesday at a U.S. Senate Judiciary Committee, Sen. Schumer said it simply wasn’t realistic to expect that EB-5 could be used as a driver for development in low-income areas of the city.
He quickly shot down a suggestion by Sen. Chuck Grassley of Iowa that funds from the program might be better put to use in those areas of New York such as “Harlem and the Bronx,” where development activity has been lagging.
“With all due respect my dear friend Chuck, that’s not how cities work,” Schumer responded. “It’s like saying, ‘The only EB-5 money you can get is for wheat but you have to locate it in the corn fields of Iowa.’ Well, it doesn’t grow there. You say, ‘Maybe if you had a program it would.’ It wouldn’t.”
The lawmakers wrestled over proposed changes to the program, which allows investors to pony up $500,000 in exchange for a green card. Schumer recently co-sponsored a bill by Sen. Jeff Flake (R) of Arizona aimed at increasing the transparency of the program, which some say is open to abuse. Carlton Group chief Howard Michaels recently called it the “legalized crack cocaine” of real estate financing.
Critics of the bill say it doesn’t go far enough in terms of pushing investment towards the parts of the country that need investment the most. In New York, developers have become expert at “gerrymandering,” or selectively drawing census tracts, to make it appear as though their buildings are in low-employment areas, meaning that investors can pony up just $500,000 to access their projects, rather than being subject to a higher $1 million investment threshold.
Schumer rebuked those allegations, saying that some projects in rural areas were actually luxury facilities, such as ski lodges.
“If we’re caring about poverty here, which I do, what’s good for the goose is good for the gander,” he said. “Because of the anomaly of cities, poor people don’t live right next door to a project. It’s not how cities are structured. Where do you think people in the South Bronx work? Our office towers are our factories.”
He advocated for passing the bill as it currently stands and addressing the issue of low-employment areas later.
“[The bill will] sail through the senate like a knife through butter,” he said. “We shouldn’t let reform be held hostage by a dispute about where the money should go.”
Schumer has strong and long-standing ties to New York City’s development community. Fragomen, a law firm that has a prominent EB-5 practice, was his fourth-largest donor and has donated $82,200 to his campaign committee, The Real Deal previously reported.