The troubled EB-5 program, which is in long-term decline, is facing an almost invisible additional problem — the prospect of larger average sizes of EB-5 families.
The number of approved I-526 petitions (filed by investors) has fallen from 14,298 in FY 2014 to 4,191 in 2019. There are numerous reasons for this: widespread fraud in the program, the new and higher size of the minimum initial investment (now $900,000, formerly $500,000), a much tighter definition of the areas where such investments can take place, and huge backlogs among the Chinese applicants who dominate the program.
Now, as a result of our working with some EB-5 related visa issuances, we sense an additional problem for the program, one that I have not seen discussed in print. That is the movement of some of the visas from China — where thanks to the one family/one child policy (now abandoned) investor families are small — to other nations, with bigger families. This brings with it the threat of the same number of visas producing a smaller volume of investments.
The EB-5 program has a numerical limit of just below 10,000 visas a year. There is one visa for each family member — not one for each investment. If the average size of the families increases, the absolute number of investments falls — it is simple as that.
What has happened recently in the program is that an increasing number of visas have been issued to non-Chinese families, with one of the fastest rising nations being Vietnam — a nation with larger families (at least among investors) than China.
We recently were poring over the EB-5 issuance statistics, month-by-month, that one can see in one of the more obscure State Department datasets, which records visa issuances in detail for each post overseas, and for each subcategory of immigrant class.
We found for Fiscal Year 2019, for the posts in Guangzhou (once Canton) and in Ho Chi Minh City (once Saigon), the following EB-5 numbers:
|Ho Chi Minh City
So for every investment made from the Chinese city we have 2.88 visas, and for every investment coming from the Vietnamese city we have 4.07 visas.
Given these ratios, if all 10,000 EB-5 visas went to China in a year (which cannot happen), we would have 3,472 investments; were all the 10,000 visas to go to Vietnam that year (again impossible), it would mean 2,457 investments, a difference of 1,015 investments or (again an impossible number) a loss of $913.5 million in investments a year.
These are outer limits figures, and in reality not all the visas will migrate to Vietnam or other bigger-family countries, but the trend would suggest that the volume of investments will fall as the program moves to nations with larger families than those found among Chinese EB-5 investors.
This trend puts, or should put, the EB-5 middlemen in a pickle. If I score additional EB-5 investments from Vietnam (or other big-family countries), I will help my personal financial interests, but I will, at the same time, reduce the total volume of EB-5 investment in the United States, and thus the potential political support for the program.
Frankly, it could not happen to a nicer program. EB-5 is a clumsy, expensive, unnecessary, and fraud-plagued way to get relatively small amounts of overseas investments to come to America, while causing the admission of a needless number of extra immigrants.
The January 2020 Bump in the Program. We stumbled on the data noted above while looking for a less significant trend — what happened to the flow of visa approvals, month-by-month, as a result of the November 2019 effective date of the new, more restricted regulations for the EB-5 program. This is what we found:
EB-5 Visa Approvals, Family
|Ho Chi Minh City
Source: U.S. State Department.
So there was a bump of new visas, reflecting a surge of approvals earlier as investors sought to get under the wire with $500,000 deals, rather than $900,000 ones, caused by the new regulations.
The writer is grateful to CIS intern Joshua Timko for his research assistance.