The EB-5 visa program, which has pumped hundreds of millions of dollars into the development of Hudson Yards, is set to be extended by Congress, the Wall Street Journal reports.
The program was set to expire on September 30, but Congress passed two short-term continuing resolutions that have kept it running. Although the last of these resolutions expires today, insiders believe that Congress will reach a deal to extend the program – although that deal will probably include changes that will make it tougher for developers to use EB-5 money to build in prosperous areas.
This will almost certainly have an effect on Related Companies, which dominates the EB-5 market nationwide, and has used it to raise $600 million for the development of Hudson Yards. Related has spent more than $700,000 this year lobbying Congress to renew the program without making any changes, but it may have no choice but to accept certain new restrictions.
As previously reported in Hudson Yardies, the EB-5 program offers green cards and potential citizenship to foreign investors in exchange for economic investment in the U.S. The minimum investment amount is $500,000, and investors must also “plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.”
The program was created in the 1990s to give an economic boost to rural and impoverished areas with high unemployment. But developers have worked with state governments to cobble together districts that connect projects in affluent urban areas with lower-income neighborhoods in order to meet the program’s requirements.
For example, the district that includes Hudson Yards also includes a West Harlem housing project with a high unemployment rate.
In the past, almost all New York developers have qualified for the $500,000 minimum investment amount of the “targeted employment areas” the program was designed to stimulate, immigration lawyer Ron Klasko told The Real Deal. “Many of them will not qualify for that under this new law,” Klasko said.
Likely changes to the EB-5 program would raise the minimum investment to $800,000. In addition, “gerrymandered” districts that include both high- and low-income areas would be largely eliminated. The Journal reports that under the new plan, urban “targeted employment areas” would have to consist of “12 contiguous census tracts, largely clustered around the [development] projects, or projects in census tracts with high poverty rates.”
Finally, 2,000 of the 10,000 visas issued annually would be set aside for largely rural areas. Obviously, this would limit the number of investors available to urban developers like Related.
“There have been long waiting lists for investors in China when they were competing for 10,000 visas,” Klasko told The Real Deal. “Now many of them for the New York projects will be competing for [fewer] visas.”