If a majority of diners at a restaurant, night after night, reported food poisoning, the health department would soon close it down.
Similarly, if an auto plant were to have a majority of its cars fail to operate, management would either close the factory or re-tool it in a major way.
But there are different standards for government programs, particularly those that benefit the well-connected, and the EB-5 (immigrant investor) program keeps rolling along despite the fact that a majority (53%) of its applications were rejected by the Department of Homeland Security in the 21 months spanning July 1, 2021, to March 31, 2023.
The information comes from an industry source, the webpages of IIUSA, a data set that I should have been following, but had not. That source presumably is using government data.
I noted previously how slowly the EB-5 program had been recovering from a hiatus caused by the lack of renewed authorization by the Congress for a period of nine months and by the reforms instituted by it when it did do so. My measure had been the issuance of visas in the program by the State Department.
The use of visas as a measuring stick is a valid one, but there is a more basic one: approval of the form I-526 by DHS. An alien with $800,000 to invest in a regional center project files the I-526 prior to seeking the set of visas for the family.
What I have just stumbled on is that most such forms are rejected by DHS, an entity that generally approves 85-90% of the applications before it. Back in the last quarter of FY 2021, when the Biden Administration finally sensed that there was something deeply wrong with this controversy-filled program (including much theft of alien funds) it rejected fully 84% of the EB-5 applications in front of it.
In the quarters since then the denial rates have run from a low of 32% to a high of 74% with the most recent rate being 55%., as the table below indicates:
EB-5 applications (I-526) Approved and Denied, FY 2021-FY 2023 |
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| Period | Approved | Denied | Percentage Denied |
| Q2 FY 2023 | 406 | 498 | 55% |
| Q1 FY 2023 | 271 | 129 | 32% |
| Q4 FY 2022 | 259 | 276 | 52% |
| Q3 FY 2022 | 264 | 191 | 42% |
| Q2 FY 2022 | 50 | 102 | 67% |
| Q1 FY 2022 | 16 | 45 | 74% |
| Q4 FY 2021 | 50 | 266 | 84% |
| Totals | 1,316 | 1,507 | 53% |
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Source: Columns two and three, Form I 526 Dashboard, IIUSA Invest in the USA; column four, CIS calculations from columns two and three |
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Historically, EB-5 projects that were supposed to benefit depressed areas, were, mostly, real estate projects in glitzy downtown areas (with maps drawn to gerrymander upscale neighborhoods with poor ones to make them appear depressed). The EB-5 investments provided low-cost “mezzanine” financing to the developers. Congress revised much of the program in 2021 and established set-asides for investments in genuinely depressed rural areas (20 percent of the program), depressed urban ones (10%) and for infrastructure programs (2%). These set-asides can produce no-waiting visas for the aliens concerned but have been little used.
The program continues to issue backlogged visas for Chinese and Indian investors; the immigration law's per-country caps slowed the issuance of EB-5 visas to aliens from those two nations over the last decade or so.
In the past developers had been keen on the program because it allowed them to pay one or two percentage points to the aliens for mezzanine financing, when the market rates were close to 10 percent. Mezzanine financing is the part of a project funding structure in which there is no collateral.