ICIC Study: EB5 Program is Underutilized Tool of Urban Redevelopment24 Jul 2014
Many of America’s oldest cities share a common trait: an urban core that’s wasting away, even while surrounding suburbs and exurbs continue to grow. Instead of crying over spilled milk – the decades of planning decisions that privileged private cars over public transit, that encouraged flight to the suburbs, and so on – the most forward-looking and pragmatic cities are seeking to undo the damage by attracting more people and more investment to their blighted centers.
In recent years, mayors of New York, Baltimore, and Detroit – among other cities – have openly embraced immigration as a way to repopulate failing neighborhoods and revitalize local economies. The federal EB5 visa is one of several federal programs that help harness the power of immigration for this task, directing foreign investment and entrepreneurial talent to areas with high poverty and unemployment, by providing lawful permanent residence – green card status – to foreign nationals who invest capital in a U.S. business, and thereby produce jobs for U.S. workers. Nonetheless, a new study from the Initiative for a Competitive Inner City (ICIC) finds that the EB5 program remains underutilized, and could be used far more effectively as a tool of urban redevelopment. [See Increasing Economic Opportunity in Distressed Urban Communities with EB5, by Kim Zeuli and Brian Hull, Initiative for a Competitive Inner City, Jun.2014.]
It’s not that the program isn’t successful. According to ICIC, there are currently about 440 EB5 regional centers in the United States, and no lack of interest in creating new ones: the government received over 6,300 EB5 applications last year. The economic impact is significant as well. Citing a recent Brookings Institution study, ICIC notes that, “[S]ince 1990 the EB5 program has captured approximately $5 billion in direct investments and created over 85,000 full-time jobs.”
Impressive numbers, yes, but still not commensurate with the EB5 program’s potential impact, ICIC argues, because too many stakeholders, public and private, simply overlook the program, due to its relative obscurity and Byzantine complexity. Those who know about the program may be put off, ICIC says, by the prospect of dealing with government bureaucracy, and by the program’s “negative reputation, due to a few high-profile cases of fraud.”
What to do? The ICIC study recommends three key steps to improve the market penetration of EB5 program, nationwide:
- Develop an educational campaign on using EB5 as a tool for impact investing. For the EB5 to reach its full potential, city and regional planning authorities – and local foundations – need to better understand the nuts and bolts of the program, as well as the benefits it can bring to distressed communities.
- Build a nexus of EB5 experts. Due to the complexity of the program, local economic development agencies need expert guidance to navigate the application and implementation process, until they have sufficient familiarity to run things on their own. ICIC calls for a capacity-building program that would deploy EB5 experts to inner cities to train a new corps of local EB5 professionals.
- Identify and invest in EB5 projects to maximize impact. ICIC calls on local foundations and community organizations to identify and coordinate potential EB5 investment projects, and underwrite them with low-cost loans and subordinated equity funding, to make them more attractive to foreign investors.
Policy wonks of every political stripe have been converging on this notion for some time now: that immigrants built these cities in the first place, and could once again play a role in revitalizing the urban areas that most Americans call home. One hopes the ICIC study will spur state and local stakeholders to make better use of the EB5 program, as a vital tool of urban revitalization, and in the process, remind us all of the benefits of continuing to be a nation of immigrants.
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