Why High Net Worth Immigrants May Be Ignoring America’s EB-5 Program

According to investment migration consultancy Henley & Partners, some 13,000 high-net-worth individuals will leave China and Hong Kong this year, almost as many as the 15,000 predicted to depart Russia. The Toronto Globe and Mail reports, “They will take with them billions of dollars in assets, with Portugal, Singapore and a number of Caribbean countries among the top destinations, thanks to generous residence or citizenship programs.” According to WealthBriefing, “The UK and the US have lost their appeal as places for millionaires to reside, while Singapore, Israel, Australia and the UAE, among others, are becoming more attractive. The report adds, “America is notably less popular among migrating millionaires today than before the pandemic, perhaps owing in part to the threat of higher taxes.” It indicates the U.S. is falling behind as a leader in attracting investor immigrant wealth, listing in apparent order of priority,“The top 10 countries in terms of net inflows of millionaires this year will be the UAE, Australia, Singapore, Israel, Switzerland, the US, Portugal, Greece, Canada, and New Zealand.” The question is whether this is a long term trend or temporary?

The U.S. Has Been The Leader

The United States has always provided foreign investors a stable and welcoming market, a predictable and transparent legal system with protections for property rights, low taxes, great transportation and infrastructure support, and access to the world’s most lucrative consumer market. Foreign investors looking for political stability, lower production costs, easy communication, a good exchange rate, and a favourable host country policy about foreign investment, found these in America. If you add the fact that America has a track record of cultivating entrepreneurship and a culture of determination and motivation and it is easy to see why America has been so attractive to foreign investment in the past.

What Happened?

So what exactly has changed, especially given the current strength of the U.S. dollar, America’s growing GDP and the many job openings in the U.S. economy now? The answers might be found by reflecting on what has happened over the last few years to the EB-5 foreign investor immigration program in the United States.

Firstly, with the election of Donald Trump as president, there was a significant exodus of top American bureaucrats. Apparently some 500 senior officers left the Department of State alone. When added to the pandemic and illnesses of staff, the net effect was to slow down overseas processing at U.S. consulates. The exodus and the pandemic also impacted the Department of Homeland Security where officers also reported illnesses and had to work from home. The result was processing slowed to a crawl.

Meanwhile, politically speaking, the EB-5 program was derailed in June of 2021. The regional center part of the program was cancelled because it was decoupled from its normal re-authorization as part of the Congressional budgeting process and thus allowed to sunset as at June 30th, 2021. Since regional centers accounted for well over 90 percent of the investment activity under the program, the closure of the program from June 30th, 2021 until it was finally reopened on March 15th, 2022 resulted in stagnation of EB-5 foreign investment into the USA.

A third factor that impacted the program was the confusion over what amounts were required from investors to qualify for a green card and requirements for regional centers to operate under new legislation that was passed by Congress. The amounts changed over time. Initially only $ 500,000 was required for regional center investments, then $ 900,000 was required because of a regulatory change implemented by the U.S. citizenship and Immigration Services (USCIS), then the amount changed following litigation to a lower $800,000, which remains the amount required today. The amounts for direct investment EB-5 applications also shifted from an initial amount of $ 1 million to 1.8 million, and now down to $ 1,050,000 today. There was also a complication over the issue of whether existing regional centers needed to re-qualify under new EB-5 legislation to accept investors. All this now seems to have settled.

There were the long-standing complaints about long processing times and priority dates that investors from countries like China and India face when it comes to the EB-5 program and immigrating to America. But these have been around for a long time and shift as events unfold in Washington. For these reasons they were less likely to have been the principal reasons for the recent decline in foreign investor interest.

Other Possible Factors

More broadly, there is some anecdotal evidence that a few recent events have impacted the perceptions of foreign investors in the desirability of investing in the USA. Among those are: the January 6th, 2022 disturbances on Capitol Hill, and the recent Supreme Court of the United States decisions related to the Second Amendment right to bear arms and the reversal of Roe v. Wade dealing with abortion rights. These occurrances have resulted in an uptick in interest of Americans in moving to Canada for example, and may also be playing a role in foreign investor thinking regarding America. Their long-term impact remains to be seen.

Returning To Leadership

For the most part, however, the impediments to foreign investment under the EB-5 program have been temporary in nature and have subsided. In time, the issues that were of concern will settle. Hopefully, America will be able to return to its leadership role in this field and once again attract investors to projects initiated here.