If you know me, you’ll know I am a firm believer in the strength of the United States economy. The economy was booming before the virus due to strong fundamentals. While COVID-19 presents unique challenges on many fronts, I am certain the U.S. will recover and recover stronger than before.
One program that has helped to stimulate investment in economies throughout the nation is the EB-5 visa program. This program lets foreign investors get green cards in exchange for investing in for-profit businesses that create jobs for Americans. Check out my short primer for more details.
At first, the program wasn’t very popular. Investment ramped up after the Great Recession of 2007-2008. In 2019, the Trump administration increased the investment requirements. However, with the COVID-19 situation and the economic stimulus packages, the Trump administration is considering greatly expanding this program. What does this mean?
- Job growth for Americans
- More commercial real estate investment dollars
- More total investment dollars
- Much needed employment opportunities for rural and high unemployment areas
- An indication that the U.S. is still the world leader able to attract foreign investment
I’m going to tell you why this program is a great idea and what we can expect if the Trump administration expands the program
The Economic Promise of a Boosted EB-5 Visa Program
Every year, the EB-5 visa program offers 10,000 visas to foreign investors who invest in a for-profit business that creates 10 jobs for Americans. Minimums for investment are either $900,000 for rural or high unemployment areas or $1,800,000 for other areas nationwide. Commercial real estate projects are the leading business types, with the $25 billion Hudson Yard development in New York City a popular project.
Forecasting Jobs and Investment Dollars
Barron’s and other news outlets have reported that $5 billion a year is generated from the 10,000 visas. About one-third of those are investors, the remainder immediate family. Let’s round to 3,000 investors bringing in $5 billion a year. Remember, 10 jobs per investor. 30,000 jobs.
Now, while the program has a cap of 10,000, it often has a backlog of applications. While the numbers are somewhat difficult to track, the U.S. Citizenship and Immigration Services (USCIS) makes available quarterly and yearly records of I-526 forms processed. The I-526 tracks immigration petitions from foreign investors, and is a required form for EB-5 visa investors. As of April 2020, there are still 17,000 pending I-526 applications. This year, the program has received over 4,000 applications. Both these numbers represent the demand for the program.
Now, the Trump administration proposed increasing the annual visa offering from 10,000 to 75,000 and halving the total needed to invest from $900,000 to $450,000 for rural or high unemployment areas. At the time of writing, most EB-5 investments were not in rural or high unemployment areas, although this could change. So, if we assume that 75,000 visas bring in about 30% investors, that’s 22,500 new investors, bringing somewhere north of $35 billion. Most importantly, each investor must make 10 jobs for Americans, so that is around 225,000 jobs for Americans. EB-5 investments can last from three to 10 years or more, and may include more than one for-profit business.
Bringing It All Together
Just to recap. We have a strong demand for the program already, which means our country is a big investment opportunity. The Trump administration is looking to expand the program by 650%. That could bring billions of dollars in revenue and create countless jobs for Americans. The EB-5 investment dollars are tied up for years, creating jobs for at least the short- to mid-term. Investors want to bring their money here, and with this program, many will – and in the process create jobs for many Americans.