US Investment Visa May Jump to $1.35 Million
The U.S. may lose its luster as an immigration destination for Asia’s wealthy thanks to Donald Trump’s anti-China rhetoric and scenes of valid green card holders being held at airports across the country after the U.S. president’s hastily drawn travel ban in late January.
Soon there may be another reason to avoid the U.S.: the price for getting an immigrant investment visa may go up. Way up. The U.S. Department of Homeland Security (DHS) is proposing to hike the minimum investment amount required to apply for the popular, if controversial, EB-5 investment visa to $1.35 million from $500,000.
Today, the EB-5 program offers a path to U.S. citizenship if you invest in project in a rural community or a high-unemployment area that creates at least 10 jobs. Individuals can also gain residency by investing at least $1 million in an economically strong area, rising to $1.8 million under DHS’s proposal.
But it’s the shift in the minimum investment that’s likely to change the complexion of a program that has attracted thousands of applicants from China and led to the building of everything from luxury skyscrapers to pizzerias across the U.S. A Donald Trump-branded hotel property in Texas is even tapping the program to raise funds. “Changing the minimum threshold in such manner will totally change the profile of EB-5 future investors,” says Bastien Trelcat, managing partner, Harvey Law Group.
The proposal also would put DHS in charge of deciding which tracts of land are worthy of low-cost investment dollars, a move designed to ensure EB-5 funds help disadvantaged communities as intended. The current state-government led system leads to inconsistency at best, and at worst, allows developers to piece together thinly related tracts of land to meet the high-unemployment criteria required to attract the minimum investment dollars needed to get a U.S. green card.
Immigration lawyers support the proposed changes, the first to EB-5 since the early 1990s. “It’s ripe for change, it needs to be changed,” says Scott Bettridge, a partner at Cozen O’Connor. The way targeted employment areas are designated now “has led to individuals filing applications which were not the intent of the program,” he says.
The required investment amounts should rise too, Bettridge says, although he believes the DHS went too far with its proposed hikes and suspects the thresholds will come down after the public comment period ends April 11. But Reaz Jafri, partner at Withers Bergman, says EB-5 has for too long provided an inexpensive route to the U.S., “the most attractive destination on the planet,” when many smaller nations require far heftier investments. Consider the tiny Mediterranean island of Cyprus, which provides citizenship for investing about EUR2 million ($2.1 million) in real estate.
“It appears to be an insane increase,” Jafri agrees, but if you take inflation over 25 years into account, “it seems to me to be quite reasonable.”
By proposing rule changes instead of going through Congress, DHS may have effectively devised a way to introduce reforms that have eluded EB-5 for years. Most observers expect the changes will go through, although with adjustments to the investment thresholds. Congress could, however, step in before the comment period ends with their own proposals, which could even include the program’s elimination.
EB-5 has been wildly popular among investors in China as an easy way to immigrate to the U.S. Rosen Consulting Group estimates Chinese investors have generated at least $9.5 billion in investment capital and created at least 200,000 jobs since flocking to EB-5 beginning in 2010. In 2015, the government had to impose a quota system so others could get one of the 10,000 EB-5 visas issued each year to investor applicants and their family members. In fiscal year 2015, 8,156 EB-5 visas were issued to mainland Chinese, about 84% of a total 9,764 visas, U.S. Department of State statistics show.
The backlog of Chinese applicants extends as long as five years by some estimates. Those who had their initial petitions accepted still can invest only $500,000 and can keep their place in line for permanent residency. Yet the leap in the required investment, combined with China tightening restrictions on capital outflows and Trump’s anti-China rhetoric, will likely make many Chinese think twice about moving to America, says Harvey Law’s Trelcat.
“I do not see Chinese nationals rushing to migrate to the U.S.,” says Trelcat. “There will be less business opportunities for them and advantages to get a green card.” Besides, Trelcat says, Chinese can apply for 10-year U.S. visas now.
Asians from outside China don’t seem in a rush to fill their place, Trelcat adds. Instead, his firm is fielding more inquiries for visas in Canada and Australia. “The application processing is simply faster and simpler,” he says.