The Immigrant Investor (EB-5) Program Is in Long-Term Decline

Even without any impact from the coronavirus, a new review of government data shows that the EB-5 program for immigrant investors is in a long decline, which probably will be aggravated by the new and tougher regulations brought into force in November of last year.

Under the old regulations, an alien investor could secure a family-sized set of conditional green cards for a DHS-approved, but not guaranteed, investment of $500,000. The new rules increased the minimum size of the investment to $900,000 and made it more difficult for middlemen to place the investments in already plush downtown urban areas, as we described at the time.

Another factor, operating quite separately, is the huge backlog of visas for investors from China, the nation from which most EB-5 investors are recruited. A Chinese national could invest in the program but not get a visa from that investment for many years. There are currently shorter backlogs for investors from Vietnam and India.

A third factor, as we have reported regularly, is the high incidence of fraud in the program, fraud that usually adversely impacts the investors.

The most obvious measure of aliens' interest in this program is the number of I-526 applications filed with USCIS indicating that an alien investor has made the needed investment; we have data on this variable through September 30, 2019. Another, more indirect, measure of interest is the number of appeals from negative I-526 decisions to the government's appeal body, the Office of Administrative Appeals. These numbers are available through March 30 of this year.

It should be borne in mind that the vast majority of applications were approved, and many of the denials were not contested.

This is what we found:

For many years, there were few appeals of denials from the Chinese investors, who were used to living in an authoritarian society in which the government is never challenged, but this changed on April 1, 2015, when the first AAO decision on this subject, in that year, was published. The totals then zoomed up to 42 for those three-month periods to the one in 2018, and have been sliding downwards since.

While the application totals have fallen by 10,000 in the years shown, this will not slow the flow of arriving EB-5 investors, which will stay at the (coincidentally) 10,000 level because of the combination of the 10,000 ceiling, and the large backup of visas for the Chinese.

There will be a change, however, one rarely seen in the field of immigration. The Indian backlog for these visas will probably disappear according to this news site.

Efforts are being made these days by the industry's lobbyists to reduce the Chinese backlog by changing the congressional formula, making only the investor — not the investor and his or her spouse and kids — to be covered by the 10,000 ceiling. That would produce a burst of some 70,000 or so immigrants if enacted.

An effort to get the federal courts to do the same thing failed recently in the DC federal district court, as my colleague Art Arthur informed me. The case was decided on March 25, 2020, and was entitled Feng Wang v. Michael R. Pompeo (18-cv-1732 (TSC)).

It will be interesting to see, in the months to come, how the November 2019 regulations have impacted the flow of these applications.

I am grateful to CIS intern Kathleen Sharkey for her research assistance.