Affluent foreigners are rushing to take advantage of a federal immigration program that offers them the chance to obtain a green card in return for investing in construction projects in the United States. With credit tight, the program has unexpectedly turned into a mainstay for the financing of these projects in New York, California, Texas and other states.
The number of foreign applicants, each of whom must invest at least $500,000 in a project, has nearly quadrupled in the last two years, to more than 3,800 in the 2011 fiscal year, officials said. Demand has grown so fast that the Obama administration, which is championing the program, is seeking to streamline the application process.
Still, some critics of the program have described it as an improper use of the immigration system to spur economic development — a cash-for-visas scheme. And an examination of the program by The New York Times suggests that in New York, developers and state officials are stretching the rules to qualify projects for this foreign financing.
These developers are often relying on gerrymandering techniques to create development zones that are supposedly in areas of high unemployment — and thus eligible for special concessions — but actually are in prosperous ones, according to federal and state records.
One of the more prominent projects is a 34-story glass tower in Manhattan that is to cost $750 million, one-fifth of which is to come from foreign investors seeking green cards. Called the International Gem Tower, it is rising near Fifth Avenue in the diamond district of Manhattan, one of the wealthiest areas in the country.
Yet through the selective use of census statistics, state officials have classified the area as one plagued by high unemployment, the federal and state records show. As a result, the developer has increased the project’s chances of attracting foreigners who will accept little, if any, return on their investment in the project if it means they can secure U.S. visas for their families.
In interviews, New York State economic-development officials praised the program but were reluctant to accept responsibility for administering it. Indeed, some state officials who certified projects for the program acknowledged that they did not know what was being built. They said they were following guidance from federal regulators.
“This program serves as a valuable tool to support job-creating projects that will put areas of high unemployment on a continued path to economic recovery and growth,” said Austin Shafran, a spokesman for Empire State Development, the state agency that oversees the program in New York.
Urged on by federal and state officials, investors in faraway places like Shanghai and Seoul along with U.S. developers have been flocking to the program, which was created by Congress during the recession of 1990.
Under the program, known as EB-5, investors receive a visa that provides residency for two years and can be converted into a permanent green card if the holders can show that their investment produced at least 10 jobs, even if the project has not been completed.
With the surge in EB-5 projects, many lawyers and consultants, in the United States and overseas, are getting involved. In China alone, more than 500 agents are jockeying to connect wealthy Chinese people to U.S. developers, experts said. Investors throng EB-5 conferences.
Many, successful in their own countries, said they wanted to secure U.S. residency for their children. But the competition has given rise to unsavory practices, EB-5 lawyers and consultants said, like agents who falsely promise guaranteed returns.
The minimum investment in the program was set at $1 million and has not changed in more than 20 years. But if the project is in a rural area or a place where the unemployment rate is 50 percent above the national average, the threshold for investing is $500,000, not $1 million.
Officials in other states have expressed dismay over how New York developers were using the program. They said New York was unfairly siphoning off investments from less-developed areas.
“A lot of projects are in areas that are head-scratchers,” said James Candido, an official with Vermont’s Department of Economic Development.
Other states have sometimes not allowed such questionable development zones. California told a developer to relocate a manufacturing plant for a surgical-products company from a more prosperous part of San Jose to a poorer one, said Brook Taylor, a spokesman for the Governor’s Office of Business and Economic Development in California.
Immigration for the wealthy: Program raises money, debate
Posted on December 20, 2011