2020 was a tumultuous year for the EB-5 Immigrant Investor Program. 2020 saw only 114 new applicants. 2021, however, will welcome many more immigrant investors under the residency-by-investment program. Many of these investors come from India or Africa but already reside in the United States under a different visa program. All prospective investors hope to achieve U.S. permanent resident status.
EB5 investment program applications have fallen since peaking in 2015, when close to 15,000 EB-5 investors and their families applied. Applications subsequently dropped but are now up in 2021.
Why Did EB-5 Demand Drop in 2020?
The EB-5 space, like many other industries, was hit hard by the COVID-19 pandemic. U.S. embassy and consulate service suspensions worldwide effectively ended the EB-5 investment process for many foreign investors. The pandemic also caused many other investors to decide to wait until the pandemic had passed to make their EB-5 investment.
Another key demotivator for prospective EB-5 investors was the Modernization Rule. Enacted in November 2021, the Modernization Rule increased the minimum required investment amount by 80%, making the minimum investment amount in a targeted employment area (TEA) $900,000 instead of $500,000. The minimum investment amount for all other investments rose to $1.8 million from $1 million. Many EB-5 investors hurried to submit their I-526 petitions before the investment amounts increased, resulting in many applications being filed in October and November 2020, with essentially none in the following months. Many applicants could simply no longer afford to make an EB5 investment after the minimum investment amounts were increased.
United States Citizenship and Immigration Services (USCIS) inefficiencies also reduced the number of investors in 2020. Investors from China, Vietnam, and India all faced backlogs at the beginning of 2020. While the Indian backlog cleared up in July 2020, investors from China and Vietnam still face long wait times. Furthermore, these long wait times have intimidated new investors, even if their country of origin does not currently have a backlog. Moreover, many other investors simply decided that the program wasn’t worth the delays, given USCIS’s shockingly slow pace in adjudicating I-526 petitions.
Why Is EB-5 Demand Increased in 2021?
Although the pandemic is still ongoing as of April 2021, the world has begun to adapt, and many foreign investors are now looking to make an EB-5 investment.
Another factor contributing to an increased number of applications is the Biden administration, as President Biden is considered far more immigration-friendly than President Trump, with Biden’s administration even putting forth a list of proposed changes to the U.S. immigration system. Most of these changes would benefit EB-5 investment participants directly or indirectly.
The biggest reason I-526 filings are up is because the EB-5 Regional Center Program has a sunset date of June 30, 2021. The regional center program was previously included in a larger government spending bill that was automatically renewed whenever a new congressional budget was, but Congress separated the EB5 investment program from the larger bill when it reauthorized it in December 2020. This has increased the EB-5 Regional Center Program’s risk of termination.
What Would Regional Center Program Termination Look Like?
While the risk of termination for the popular regional center program is higher than it has ever been, there is hope in the EB-5 Reform and Integrity Act that was introduced by Senators Patrick Leahy and Chuck Grassley. The bill would provide detection mechanisms to root out fraudulent activity, provide improved integrity measures to protect investors, and reauthorize the EB-5 Regional Center Program until 2024.
Many EB-5 industry leaders believe that the EB-5 investment program will not be reauthorized if it is not reformed. Consequently, although industry stakeholders are confident that the bill will be passed, many are worried that if the EB-5 program were terminated, it would effectively eliminate foreign nationals’ ability to immigrate to the United States under an EB5 investment.
There may be a rush of investors filing their I-526 petitions in advance of the program’s looming sunset date. While the EB-5 Regional Center Program will likely be reauthorized, foreign nationals pursuing U.S. permanent residency should make their EB-5 investment before June 30, 2021.