Reforming the EB-5 Investor Green Card Program

The agony and the ecstasy

By George Fishman on April 5, 2022

George Fishman is a senior legal fellow at the Center.

On March 9 and 10, the U.S. House and Senate passed legislation funding the federal government and also containing a provision reauthorizing the “regional center” driver of the EB-5 immigrant investor visa program through FY 2027 after an eight-month lapse. This brings closure to a seven-plus-year effort to reform the “corrupt, scandal-clad program” (in the words of Sen. Chuck Grassley).

I remember being drawn into this seemingly tilting-at-windmills crusade in 2015 by Sen. Leahy’s office when I was working on the House Judiciary Committee under Chairman Bob Goodlatte. Little did I know at the time what a quagmire I was walking into: innumerable hours spent in stultifying negotiations (including on vacation, to my wife’s chagrin) with industry lobbyists, other House and Senate offices, and House and Senate leadership that led to intricately crafted and quite fragile compromise deals in which each side had to make painful concessions — deals that always fell apart at the last minute seemingly on the orders of “big-moneyed New York City real estate interests” (again, Grassley’s words). It made me wonder whether the negotiations were in fact set-ups from the start, legislative professional wrestling matches scripted to fail but giving the illusion of good-faith negotiations. Lest you think I am being overdramatic or have a martyr complex, I was not the only one becoming frustrated. Listen as Grassley vents his spleen upon the collapse of the deal du jour early in 2018:

[F]or too many years [the Senate] has witnessed the perversion and degradation of a program that sells, yes sells, our citizenship. ... Sadly, in the last decade this program has been hijacked by big-moneyed New York City real estate interests. These developers now take almost all the foreign investment from this program, and for the last few years they’ve actively prevented this body from enacting any reforms. ... For years, I’ve been fighting in a bipartisan way to reform this corrupt, scandal-clad program. I’ve been fighting to protect our national security, to ensure foreign investment is going to the most deserving areas, and to make sure that American citizenship isn’t sold at rock bottom prices in order to feed the addiction of New York interests to cheap money. But, no matter how hard I’ve fought, each and every time we’ve tried to reform this program these same moneyed interests have used their political influence and political connections to block any meaningful reforms. This is sickening, and it’s exactly why most American people question Washington, D.C. ... I could speak for hours about the corruption in this program. Faced with this appalling list of fraud, corruption, and national security loopholes, for three years I’ve been working with Senator Leahy and our counterparts in the House of Representatives to produce real EB-5 reform. Our staffers have spent countless hours, nights, and weekends meeting with congressional colleagues and industry stakeholders to hammer out a compromise that is fair to all sides. But our offers have constantly been rejected by big moneyed industry interests every single time. This time has been no different. For the last year, my staff, along with Chairman Goodlatte, Senator Cornyn, and Senator Flake’s teams, has worked around the clock to produce an EB-5 reform package. Everyone made numerous concessions in order to reach a deal, and after more than twenty meetings and countless hours of drafting, we produced a reform package that was fair. ... But, these reforms weren’t acceptable to the big moneyed New York industry stakeholders who currently dominate the program. And because big money interests aren’t happy with these reforms, we’ve been told they won’t become law. Let that sink in for a minute. In spite of the fact that reforms were agreed to by Congressional offices and had the support of the largest EB-5 trade association, they won’t become law because a few EB-5 businesses with a lot of money have used their political connections and influence to block them.

Now, this is not to say that the always futile negotiations did not have their moments of levity. I periodically got to slam my shoe on the negotiating table like First Secretary of the Communist Party Nikita Khrushchev. (Well, I might be exaggerating, but I was told that I was “animated”.) And, when leadership decreed that we could no longer use the term “targeted employment area” (TEA) because it had accrued negative connotations (even though we were retaining for all intents and purposes targeted employment areas), I replaced the term in the draft text with the symbol Prince used when he was fighting with his record label, and noted that it was “the term formally known as targeted employment area”.

What is the EB-5 investor visa program and why did it go to seed? I’ll let Chairman Goodlatte explain (at a hearing he convened in 2016):

In 1990, Congress created the [program]. About 10,000 green cards each year go to aliens who invest in a business and will create 10 jobs. Congress’ goal was to create new employment for U.S. workers and to infuse new capital into the country and to target investments to rural America and areas with particularly high unemployment, areas that can use the job creation the most. ... Unfortunately, over the years the program has strayed further and further away from what Congress envisioned.

The Immigration Act of 1990 provided that alien investors must invest $1 million. However, the Department of Homeland Security may in the case of investments made in a targeted employment area, rural or high unemployment, specify a lower amount. Since 1990, over 25 years, this has been $500,000. Finally, DHS has the authority to increase the minimum investment amounts. Over the last quarter century, the minimum investment amounts have never been adjusted for inflation. As a result, the real value of each investment has fallen by almost 50 percent, depriving the U.S. economy of billions of dollars a year.

Congress wanted to incentivize investments through a lower investment amount in areas with a scarcity of jobs that find it hard to attract capital. ... [Its] expectation was that the vast majority of EB-5 investors would invest $1 million.

Yet, last year almost all investor visas went for $500,000. Why? Well, as one EB-5 attorney has put it, most investors are interested in realizing permanent residency for a lower price tag, the logic being, why pay $1 million for a green card when I can get it for $500,000? Not surprisingly, this has led to rampant gerrymandering. ... involv[ing] the deliberate drawing of TEAs to include prosperous areas that should not be subject to the reduced capital requirements.

Here is the vaulted conservatory with baby grand piano at the 926-foot Four Seasons Hotel and Private Residences at 30 Park Place in Tribeca, which describes itself as “perfectly pitched luxury,” that will, “introduce a new caliber of luxury living.”

Beverly Hills magazine says it is “poised to be one of Manhattan’s most prestigious addresses,” and a “new paradigm in sophisticated living.” Prices vary from $2.6 million to over $60 million for one condo in that building. 30 Park Place wanted to market EB-5 visas for $500,000. However, since the unemployment rate there is only 3.8 percent, New York State developed a project map that went upstream along the East River in order to lasso enough high unemployment areas to qualify.

I should mention that when, in the midst of all this, we took a family trip to New York City, I proposed that we spend a day visiting all the luxury high rises in Manhattan funded with EB-5 money and masquerading as flop houses (sort of like visiting all the celebrity homes in Beverly Hills). Unfortunately, my wife was not keen on the idea and there were no street vendors selling maps of “Lifestyles of the Rich and Famous: Condos Built with EB-5 Capital”.

Why did a powerful segment of the EB-5 industry always want to block reform? Well, as Professors Jeanne Calderon and Gary Friedland at New York University's Stern School of Business recognized:

[P]rojects in even the most affluent parts of the country [are] able to routinely qualify for the discounted investment level by combining contiguous census tracts (starting with the project site and often extending in unnatural configurations to remote sites miles away) until the weighted average met or exceeded the high unemployment threshold required by the law. This census tract aggregation is referred to pejoratively as "gerrymandering." Thus, gerrymandering rendered the two level investment threshold meaningless and immigrants flocked to invest in luxury projects by major developers in urban areas.

The “big money interests” liked the program as it was — giving them easy access to cheap capital by being able to offer foreign investors green cards at discounted investment levels meant for rural and depressed areas while still allowing them to invest in trophy projects in toney downtown zip codes.

In 2019, Kriston Capps provided a case study in Bloomberg CityLab:

Since its official unveiling last month, critics have been teeing off on Hudson Yards, the $25 billion office-and-apartment megaproject on Manhattan’s West Side. The Guardian’s Oliver Wainwright calls it “bargain-basement building-by-the-yard stuff that would feel more at home in the second-tier city of a developing economy.” ... Without their knowledge, the residents of a number of public housing developments helped to make Hudson Yards possible. The mega-luxury of this mini-Dubai was financed in part through a program that was supposed to help alleviate urban poverty. Hudson Yards ate Harlem’s lunch. ... These funds might have financed alternative developments in Harlem directly. Other developers have successfully raised EB-5 funds for projects in actually distressed areas of New York. For example, Asian Americans for Equality, a nonprofit organization, once pursued EB-5 funding to finance ... a grocery store destroyed by Hurricane Sandy in the Far Rockaways, and an affordable housing complex in Queens’ Flushing neighborhood. Instead, [the huge real estate development firm] Related sopped up hundreds of millions in funds never intended to finance luxury projects. The developer has successfully leveraged Harlem unemployment to raise more in EB-5 financing than any other developer in the nation.

But Hudson Yards has actually fallen on hard times. As my colleague David North noted a year ago, “[c]alling the project a ‘Shining Pandemic Ghost Town’, the [New York] Times reported on two groups of EB-5 investors, both from China, suing [Hudson Yards’s] developers. It said that its main tenant, Neiman Marcus, had closed its store and gone out of business, and that Covid-19 had discouraged sales of its ultra-luxurious condos.” The Real Deal reported in 2020 that Related was “halting payments to such investors in Hudson Yards because of volatility caused by the pandemic.”

A coalition spearheaded the reform effort in Congress: both the Democrat and Republican chairmen and ranking members of the House and Senate Judiciary Committees (John Conyers, Jr., Bob Goodlatte, Charles Grassley, and Patrick Leahy) — the “four corners” — inspiring not only because they put the national interest ahead of special interests, but also because they showed that bipartisan cooperation and accomplishment are still possible in today’s Washington, D.C.

In any event, the four corners came to realize that we were up against a serious structural disadvantage — the regional center “pilot” program, which accounts for about 95 percent of all EB-5 green cards issued — always expired at the end of a fiscal year. Thus, the “like it just the way it is” crowd knew that if agreement couldn’t be reached on program reform, Congress would always just include a line extending the program for another year or two in whatever gargantuan “must-pass” government funding juggernaut was steaming through Congress. They never had a reason to negotiate in good faith. Thus, one component of our strategy was to “decouple” the expiration date of the regional center program from the end of the fiscal year. If industry’s bad actors knew that Congress would have to pass free-standing legislation to keep the program from expiring, they would suddenly be incentivized to negotiate in good faith. Of course, they knew this too, so we could never get leadership to agree to our request.

Goodatte, Conyers, Grassley, and Leahy also realized that much of the urgently needed EB-5 reform could be accomplished administratively by DHS. They thus urged Jeh Johnson, President Barack Obama’s secretary of Homeland Security, to promulgate reform regulations. Their entreaties were successful, and they kept the pressure up long enough for the proposed regulations to emerge from the scrum of last-minute agency requests and be published during President Obama’s last week in office.

The four corners stated in comments they submitted to DHS regarding the proposed regulations that:

You will receive many comments from parties with a direct financial stake in seeing that these proposed regulations are never finalized. ... Our comments are submitted with the sole intent of advancing the national interest and the integrity of our immigration system. ... While many of the distortions and abuses that have come to dominate the program require statutory change — which we have been intently pursuing for a number of years — there is much that USCIS can do to restore the program to its original vision and ensure that it achieves the goals of "attract[ing] entrepreneurs and job-creators into the U.S. economy." We therefore wrote to then-Secretary of Homeland Security Jeh Johnson last March, "urg[ing him] to swiftly take all necessary and appropriate steps within [his] authority towards this goal." We also outlined in the letter what we believed those steps needed to be.

We were extremely pleased when Secretary Johnson issued these proposed regulations. The regulations, if finalized, would dramatically reform the EB-5 program and largely return it to the program that Congress envisioned in 1990. The program would generate increased investment capital for the U.S. economy and ensure that a healthy proportion of that capital actually be invested in rural and economically distressed areas. There will be no dispute about "executive overreach" — the proposed regulations are firmly founded in the explicit statutory authority provided by Congress when we created the EB-5 program.

As to the gerrymandering of targeted employment areas, the four corners stated:

The [Government Accountability Office] found that of those aliens petitioning to invest in high unemployment TEAs, 90 percent were investing in projects that combined ... census tracts ... in order to meet the statutorily-required unemployment rate. ... [T]he GAO study found that only 12 percent of projects that qualified for the lower investment amount based on being in high-unemployment TEAs were actually physically located in areas with unemployment rates of greater than 8 percent. ... However, the national unemployment rate in the fourth quarter of 2015 averaged 5.15 percent. So, to qualify as a high-unemployment TEA, these projects would have had to show an unemployment rate of in the neighborhood of 7.725 percent. If we look at the actual physical location of the projects, few would have qualified as being in high unemployment areas.


TEA incentives will be meaningless unless projects are required to be closely located to the actual area of need, as Congress intended. Anything short of this standard will result in underserved and undercapitalized areas seeing little to no investment from the EB-5 program. That is not acceptable in our view.

The final regulations were actually issued by the Trump administration, one of the few instances of a coming together of the minds of the Obama and Trump administrations. Before the regulations were promulgated, Brian Darling wrote in the New York Observer that “[r]ight now, New York real estate developers are hoping a former (and likely future) New York City real estate developer, President Donald Trump, will back off from pushing a regulation that will harm job growth and infrastructure investment in New York City.” The “big-moneyed New York City real estate interests” were absolutely convinced that they could stop the regulations by just whispering in the ear of the president or his son-in-law, Senior Advisor to the President Jared Kushner. I believed they were giving themselves too much credit, and giving President Trump too little credit, but I can’t say I was ever certain as to the fate of the regulations. But to the eternal credit of the Trump administration, the final regulations were promulgated.

I have to give it to “the interests”, though — whoever they hired to write comments on the proposed regulations gave it the old college try. As DHS described in the final regulations:

A few commenters urged DHS to withdraw the proposed rule because the proposed reforms should be under the purview of Congress, as they stated that the reforms are better addressed through the legislative process ... assert[ing] that a legislative solution could address the issues in the proposed rule without the need for rulemaking. ... According to [one] commenter, it is counterproductive to revise vital components of the program while Congress is debating possible program reforms.

This was rich. The “interests” had relied on the Potemkin village of congressional “negotiations” for years in order to ensure that no reform bill ever passed Congress, and were now urging that a regulatory solution be foregone in order to allow space for more such negotiations. DHS politely declined the suggestion:

[T]he Regional Center Program has been reauthorized numerous times in recent years, without reform. ... DHS has worked diligently to provide technical assistance to Congress since 2014 to reform the EB-5 program through legislation. To date, Congress has not passed comprehensive EB-5 reform legislation. In fact, some members of Congress have specifically requested that “because Congress has failed to reform or end this program, we call on the Department of Homeland Security to expeditiously finalize regulations that would reduce the widespread abuses of the EB–5 program.”

Who might those members have been? Well, the final regulations cited a press release of Sen. Grassley titled “Grassley, Goodlatte Call on DHS to Finalize EB-5 Regulations End Unacceptable Status Quo”. And DHS went on to say that “some members of Congress, commenting on this rule, requested that DHS take this regulatory action in part because of Congress’ inability to enact legislative reforms over the 114th and 115th Congresses. In fact, the Chairs of the House and Senate Judiciary Committees noted that ‘Congress has failed to reform the EB–5 program.’”

Unfortunately, in June 2021, a U.S. magistrate judge ruled in Behring Regional Center v. Wolf that because Kevin McAllenan’s appointment as acting secretary of Homeland Security was invalid, the final EB-5 rule he signed had no force or effect and she set the rule aside. I was certainly familiar with Trump administration DHS regulations that I had worked on being enjoined. But to see the EB-5 regulations, a joint Obama/Trump effort, struck down not on the merits but as a result of a larger tussle over the lawfulness of the appointment of DHS acting secretaries — after it was promulgated against all odds — was a bitter pill to swallow.

Fortuitously, Grassley and Leahy had finally been able the previous December (after I had left the Hill to work for the Trump administration at DHS) to decouple the sunset date of the regional center program from the end of the fiscal year. They had signaled that they would oppose any reauthorization without the inclusion of reform measures and House Judiciary Committee Republican Leader Jim Jordan opposed any extension of the program (which he accurately considered vulnerable to exploitation by the Chinese Communist Party and the People’s Liberation Army). On the other hand, Jerrold Nadler, who represented Manhattan and was the late John Conyers’s replacement as lead Democrat on the House Judiciary Committee, and Senate Democrat Leader Charles Schumer of New York both obviously wanted a reform-less extension. Leadership decided on a six-month extension till June 30, 2021, as a compromise.

As the June 2021 expiration approached, Senators Grassley and Leahy made one last attempt to get the Senate to pass a bill reauthorizing and reforming the regional center program through a unanimous consent request. The good actors of the EB-5 industry, who supported reform and wanted to give the regional center program long-term stability, supported Grassley and Leahy, and the bill seemed poised for success. However, Sen. Lindsey Graham unexpectedly objected. Grassley vented:

Today’s objection, unfortunately, represents another victory for those same monied, powerful, corrupt influences that have so often worked to kill reforms to a program that they love to abuse for nothing more than their own financial benefit[.]

And, as Roll Call reported:

Grassley blamed Congress’ failure to revive the immigrant investor program on EB-5 visa abusers who “fought us at every turn, effectively sealing the program’s fate last summer.” “The program is now dead, and it’ll remain that way until all corners of the industry wake up to the reality that Congress is not going to allow these abuses to continue,” he said in a statement.

Graham’s attempt to derail reform turned out to be a short-lived success. As the lapse in authorization for the regional center program dragged on, the EB-5 industry, both the good actors and the bad, began to panic. No new investors could get their petitions approved and those whose petitions had previously been approved could not receive green cards. As Leahy’s office explained:

Backers of the EB-5 program, who in the past objected to reforms, now wanted to get it back up and running and have agreed to the reforms, according to Raj Venkataramanan, Leahy’s chief counsel on the Senate Judiciary Committee. “The dynamics were just right,” Venkataramanan said. “The industry — eight, nine months into a lapsed program — were feeling the pain at quite a high degree and essentially came to the table and asked us what the terms would be.”

And, as Roll Call reported:

Ishaan Khanna, co-founder of the American Immigrant Investor Alliance ... predicted a “bank run” if EB-5 investors have their green cards denied because of the program’s expiration. ... Litigation is also likely, both against USCIS to force the agency to process their applications and against the regional centers in an attempt to reclaim EB-5 investors’ funds, lawyers said. ... “This is really the United States reneging on foreign direct investment that has been made in the country, and it makes people think twice about this,” said Khanna. “It’s going to be hard to recover from this.”

Well, not really. As I have explained ad nauseam, the statute has always been clear that the regional center program is time-limited, with no guarantee that it will be reauthorized in the future. Just because Congress has always extended it in the past (sometimes with short lapses) doesn’t mean that it will again. But who knows what the regional centers’ overseas touts were telling prospective investors. In any event, aliens who had gone ahead and filed EB-5 petitions and had invested their money were still invested in their projects and would likely see the return of their capital with a profit. Of course, their real reason for investing was to procure green cards, not to maximize their profit. That is why developers could offer them 1 percent rates of return. Or the investors could become actual entrepreneurs and start their own businesses under the permanent part of the EB-5 program, rather than simply investors in pooled investment vehicles.

Despite the continued obstinance of some of the “interests”, good sense finally prevailed. As Fox Business reported, “in a rare bipartisan instance of successful immigration reform, the [EB-5] visa program will be resurrected with a slew of significant reforms from the Grassley-Leahy legislation — after real-estate groups agreed to the reforms after watching the program lie dormant for a year.” The good actors in the EB-5 industry were pleased. Aaron Grau, executive director of IIUSA, the largest and most representative industry trade association, stated that “this reauthorization not only provides stability for the industry and its incredible economic development ability, but it also provides assurance and protection to the tens of thousands of good faith immigrant investors who relied on this program.” And Bob Kraft, IIUSA’s board chairman, stated that “this is an incredible accomplishment and the industry owes a great thanks to Senators Grassley and Leahy. Those men and their staff have been stalwart supporters of this program and have never stopped working to improve and extend it. Their focus on integrity for the Program will serve it and its immigrant investors very well for years to come.”

The Deal

I should note that in many respects, the deal Congress reached last week is remarkably similar to H.R. 5992, the EB-5 reform legislation that Goodlatte and Conyers introduced in 2016. Everyone could have avoided a lot of drama and damage to the program if they had just listened to us then. The deal is certainly more favorable to the EB-5 industry than were the regulations. Before the regulations were promulgated, I had frequently told the “interests” that they could reach a better deal with the four corners than what they would see if regulations were promulgated. But they didn’t listen because, of course, they believed that they could keep such regulations perennially bottled up.

So, what were the terms of the deal? H.R. 5992 had called for investment levels of $1,200,000 (for projects generally) and $800,000 (for rural and depressed areas) — essentially raising the minimum investment level for projects in affluent urban areas by 140 percent (from today’s $500,000 to $1,200,000). The final regulations raised the investment levels to $1,800,000 (for projects generally) and $900,000 (for rural and depressed areas) — raising the minimum investment level for projects in affluent urban areas by 260 percent (from today’s $500,000 to $1,800,000). The 2022 reauthorization sets the investment levels at $1,050,000 and $800,000 — representing a 110 percent increase.

As for TEAs, H.R. 5992 would principally have defined them as rural areas, “priority urban investment areas” (PUIA), and areas consisting of a census tract/contiguous census tracts, each tract not being located within a metropolitan statistical area (MSA) and each tract having at least a 20 percent poverty rate or a median family income not more than 80 percent of the statewide median. The bill defined a PUIA as an area consisting of a census tract or tracts, each tract being inside an MSA and each tract having an unemployment rate of at least 150 percent of the national average (the original TEA standard), at least a 30 percent poverty rate, or a median family income not more than 60 percent of the greater of the statewide or MSA median.

The final regulations defined a high-unemployment TEA as a census tract or contiguous tracts in which the new commercial enterprise is principally doing business, and which may include any or all census tracts directly adjacent to such tract or tracts, as long as the weighted average unemployment rate is at least 150 percent of the national average. I should note that while:

[The four corners had] recommended that rather than selecting an arbitrary number of contiguous census tracts that could be included in the "area", a development project should be required to be physically located in a census tract or tracts that has or have the requisite unemployment rate in order to qualify for the reduced investment amount ... [a]lternately, [they were] comfortable with including immediately-adjoining census tracts. [They] proposed during negotiations in 2015 that: “The term "high unemployment area" ... may include any census tract or tracts contiguous to 1 or more of the tracts that have the requisite unemployment rate.”

The 2022 reauthorization defines a high-unemployment TEA essentially identically as did the regulation.


So, the regional center program has been brought back from the dead. Was this the best outcome, or should the program have been allowed to die? I’m not sure I can answer that question at present. To some extent, the answer will depend on whether the statutory reforms make the EB-5 program one that the country can be proud of (or at least one whose economic benefits make it palatable), or whether industry sharks find new loopholes, new avenues for abuse. And to some extent, now that John Conyers has passed away, Bob Goodlatte has retired, Patrick Leahy will soon retire, and Charles Grassley may soon no longer be the lead Republican on the Senate Judiciary Committee (as a result of term limits), it depends on whether the alternative — legislation passed in the future without their input — would have been worse.