It is important that the public, the residential and commercial real estate sectors, and elected officials across the country understand the benefits of the EB-5 program, the jobs it creates and maintains, and the potential it has for economic recovery after COVID to support.
Property investors saw a wild wave during the pandemic, with the short-term rent market stopping, then restarting, and property prices rising in many second home markets. What does the future hold for new second home owners and managers of more robust real estate portfolios? We will be investigating this and more in Inman throughout May.
Since 1990, the EB-5 Immigrant Investor Program has been a gateway for qualified foreign investors (who must pass security clearances and meet certain capital and job creation requirements) to obtain permanent residency in the United States.
The program is an incredibly efficient project funding tool that ensures job creation and supports the critical long-term development of the community and the economy.
The program is a catalyst for hundreds of development projects, hundreds of thousands of jobs, and was an important part of the country’s economic recovery after the 2008 recession. Now this job-creating juggernaut is set to end on June 30, 2021 unless Congress acts.
After the mortgage-backed securities financial crisis of 2008, which severely affected the real estate industry, the financing options for banks for real estate projects became expensive and scarce. Many developers turned to alternative methods of financing, including private equity, and many discerning real estate developers noticed a great and previously unknown niche financing tool: EB-5 capital.
History tells us that the program is not in danger. In fact, it has been re-approved 19 times under the Ministry of Foreign Affairs or Ministry of Homeland Security’s annual spending measure. However, re-authorization is difficult this time.
At the end of 2020, the traditional language of the re-authorization of the program was “decoupled” from the traditional berths for expenditure bills and given a separate termination date. This means that it doesn’t just expire on June 30thBut now the certainty that a must-pass appropriation law offers is also missing.
From a developer’s perspective, EB-5 investments are structured like a mezzanine or senior home loan. However, they are usually cheaper than bank loans or private equity assistance because EB-5 investors are not primarily focused on return on investment. Instead, most EB-5 investors are primarily concerned with their immigration goals and the safety of their capital.
Additionally, The investment requirements for EB-5 are usually more flexible. In the case of a mezzanine loan, the EB-5 loan terms are exactly the same as the senior lender’s terms. Since the EB-5 lenders are not required to adhere to strict banking guidelines, the investment terms are often tailored to the needs of the project.
Because of its flexibility, reliability, and low cost, EB-5 financing has become a powerful option for many looking to move forward in the residential real estate space. Indeed between 2010 and 2015, EB-5 capital of over $ 1.1 billion has invested in residential property construction projects across the country.
For EB-5 investors, housing estates and mixed-use settlements with a residential component are very common and in demand as they are viewed worldwide as a resilient asset class that ensures the security of their investments and a successful immigration process.
Overall, the program has provided more than Capital investment of $ 41 billion from around the world to fund various developments and support American companies – all free of charge to the US taxpayer. This capital investment created at least 820,000 jobs for US workers, an important contribution after the 2008 recession when residential real estate projects were very difficult to obtain adequate funding.
Right now, with more millennials entering their 30s, the demand for apartment buildings is increasing, which is an ideal opportunity for the multi-family sector to flourish.
With less than 90 days to go until the program ends, time is of the essence. It is important that the public, the residential and commercial real estate sectors, and elected officials across the country understand the benefits of the EB-5 program, the jobs it creates and maintains, and the potential it has for economic recovery after COVID to support.
If you would like to help re-authorize the program, just follow the step Coalition to save and create jobs. It’s simple, free, and powerful.
Aaron Grau is the Managing Director of Invest in the USA (IIUSA) in Washington, DC. Connect with him on Twitter or LinkedIn.