It’s known as a “golden ticket” -- the EB-5 visa that can give wealthy foreigners legal residence in the U.S. if they invest in a project that creates jobs. In recent years, these visas have become wildly popular with Chinese investors, and real estate developers have been the main beneficiaries of their cash. The Kushner family used EB-5 funds to build the Trump Bay Street apartment tower in New Jersey, which opened in November 2016 right before Jared Kushner’s father-in-law, Donald Trump, was elected president. Last May, Kushner’s sister was criticized for mentioning their Trump ties while pitching wealthy Chinese to get visas by investing in another Kushner apartment complex. Now there are reports that the U.S. Securities and Exchange Commission and prosecutors for New York’s Eastern District issued subpoenas to Kushner Cos. in May seeking details about its use of the EB-5 program. Critics say this visa-for-sale system is pocked by corruption and questionable accounting.
1. What’s an EB-5 visa?
The EB-5 special visa program allows foreign investors to reside legally in the U.S. if they pay $1 million into a new commercial enterprise that creates at least 10 jobs. If they make the investment in a “targeted employment area” -- either in a rural community or one with high unemployment -- the minimum investment is lowered to $500,000. These amounts haven’t been adjusted for inflation since the program was created as part of the Immigration Act of 1990. There’s a limit of about 10,000 EB-5s per year. Its name comes from it being the fifth preference of employment-based visas, with people having extraordinary abilities ranked as first preference, highly educated professionals ranked second, etc.
2. Do they really create jobs?
According to a 2017 report by the U.S. Department of Commerce derived from paperwork filed for EB-5s, in the fiscal years 2012 and 2013, more than 11,000 immigrant investors paid $5.8 billion into 562 projects that created 174,039 jobs -- 3.9 percent of all jobs created nationwide during those two years.
3. Why do real estate developers love these visas?
Developers turned to EB-5 applicants for cash after the 2008 recession dried up bank loans. And interest rates paid on EB-5 projects tend to be lower than bank rates, since the visa is the end goal.
4. Why do EB-5 applicants love real estate?
Because it’s pretty easy for them. Since large developments provide jobs through architecture, planning, construction, operation and maintenance, many investors can claim that they created 10 of those jobs, and developers have gotten very good at packaging these claims. A 2015 survey found that three-quarters of the applicants for EB-5s planned to invest in hotels, resorts, commercial or residential developments.
5. So what’s the problem?
The U.S. Government Accountability Office has questioned the tracking methods used to make sure the investments created the jobs they were supposed to. Real estate developers -- including the Kushners -- have been known to gerrymander the borders of the “target employment areas” that allow for just a qualifying $500,000 investment, so some projects have been built in places that didn’t have high unemployment. The investments don’t have to be permanent and can be withdrawn as soon as two years after the EB-5 investor gets her green card. The government has found it hard to confirm that some funds used for EB-5s were legally obtained. And there were charges in 2015 that a Department of Homeland Security official intervened to expedite requests from politically powerful EB-5 stakeholders.