The EB-5 Visa Program has become an increasingly popular vehicle for real estate project financing in the United States. Last year, for the first time in the Program’s history, the annual supply of EB-5 immigrant investor visas, which is capped at 10,000, was fully depleted. More than 11,000 foreign citizens applied for EB-5 Visas in 2014.

The EB-5 Program was established by Congress in 1990. It is intended to stimulate the U.S. economy through job creation and capital investment by foreign investors. It is administered by the U.S. Citizenship and Immigration Services (USCIS), a division of the Department of Homeland Security. The EB-5 Program sunsets every three years and must be renewed by Congress for the program to continue. It’s up for review again in September of 2015. 

EB-5 Visas are available to investors who make a direct minimum investment of $1,000,000 in an ongoing project or start a new business in the U.S. which preserves or creates ten or more jobs for U.S. workers. The direct investment amount is reduced to $500,000 if the investment is made in a targeted employment area. Investment through a private or public economic entity known as an EB-5 Regional Center devoted to increased domestic capital promotion, job creation, improved regional productivity and increased economic growth is also permitted. In this case, indirect job preservation or creation can satisfy EB-5 Program requirements. 

Upon making an EB-5 investment and upon approval of the application, a foreign investor (and immediate family including children under age 21) will be granted conditional permanent residence. If the foreign investor can show that the investment satisfies the EB-5 job creation requirements after about two years, the foreign applicant will be granted permanent residence. 

Fortune magazine reports that the growth in demand for EB-5 financing is largely attributed to Chinese citizens whom account for more than 80% of applicants. They seek greater freedom, a cleaner environment, and expanded educational opportunities for their children. Some U.S. developers have been active in seeking funds from foreign investors interested in EB-5 Visas. One example is Related Cos., which had an exhibit at the “Invest in America Summit” held each March in Shanghai, China. New York’s Hudson Yards, a Related Cos. development, is reportedly being financed in part through EB-5 program funds.

 In 2013, the Inspector General for the Department of Homeland Security harshly criticized USCIS’s management of the EB-5 program, saying poor record keeping made it impossible to verify claims of job creation, and that rules don’t allow the agency to punish EB-5 Regional Centers over instances of fraud. A recent Washington Times report about high-profile incidents of EB-5 fraud and skepticism about the government’s job creation claims have generated an audit of the Program by the Government Accountability Office. The audit is at the request of Senators Chuck Grassley of Iowa, Bob Corker of Tennessee and Tom Coburn of Oklahoma, ahead of Congressional evaluation of the Program for reauthorization in September 2015.

The popularity of the Program has caused concerns about application process timing, which can take up to three years, notwithstanding the fact that USCIS estimates indicate a timeline closer to 14.7 months for issuance of conditional Visas and 8.6 months for Visas. Long processing times can make EB-5 financing less popular for direct investment in individual projects, as developers are often on tight financing timelines.

The results of the Government Accountability Office audit will impact the debate on the future viability of the Program and its reauthorization. Also, there have been calls by some in Congress to make the Program permanent. As we approach September, any uncertainty surrounding extension of the Program, coupled with a strengthening US Dollar, may prove to be a disincentive to foreign investors, frustrating EB-5 financing opportunities for real estate developers.