Homeland Security Secretary Alejandro N. Mayorkas on January 5 withdrew an appeal of a court decision that meant gutting an Obama-and-Trump reform that increased the minimum size of EB-5 investments. The minimum required investment thus fell from $900,000 to the earlier level of $500,000, making it easier for aliens to buy their way into this country.
It was an ominous move on the secretary’s part, but it came at a time when most of the EB-5 program is non-operative anyway. Here’s a summary of what’s going on:
First, Behring Regional Center, a middleman agency in the EB-5 program, sued the government seeking to dismiss the reforms that had been first proposed by the Obama administration and later supported by the Trump administration. The reforms were both increasing the size of the initial investment and the drawing the boundaries of the "depressed area" in which the investment could take place — in earlier days, the investment might be in a prosperous neighborhood that was linked on paper to many distant areas where unemployment was high. A building on Wall Street was linked, via the East River, to a distant housing project where many were out of work, for instance. As I wrote some nine years ago:
The only way to get from one to the other without venturing into other [Census] tracts would be to take a boat from the building site, cross the East River, tie it up at the Brooklyn Navy Yard, and then hike or drive to the poverty-stricken Farragut Houses development.
That kind of economic gerrymandering is now OK again, though the main part of the program in which it would take place is on ice.
Second, a federal magistrate judge, a civil servant sitting in for a district court judge, ruled in Behring’s favor in a California court. She did so because she said that the acting DHS secretary at the time had not been legally appointed.
Third, the current administration appealed.
Fourth, and most recently, DHS withdrew its appeal, thus leaving in place the old rules.
Meanwhile, and totally unconnected to the court case, the U.S. Senate in June 2021 refused to extend the main part of the EB-5 program, the part that involving pooled investments run by the regional centers. What is left of the program are “direct” investments made by individual aliens, which are nowhere nearly as popular as the pooled investments. That part of the program is not doing well, as we have reported repeatedly.
The practical effect of this combination of the end of the regional center program and the DHS caving on the court case is that alien investors with only half a million dollars can make direct investments, usually in urban real estate, but this does not happen very often.
The symbolism of the government abandoning reform in this field is what is significant.