Hot off the heels of a tumultuous 2020, which saw a mere 114 new applicants to the EB-5 Immigrant Investor Program, 2021 is ramping up to welcome far more immigrant investors to the famed residency-by-investment program. Many of these new EB-5 investment participants are living in the UAE, but not necessarily as citizens. The bulk of the U.S. immigrant hopefuls are Indians and Africans with abundant liquid assets looking to secure permanent resident status in the United States.
New applications to the EB-5 program have steadily fallen since a peak in 2015, when 14,737 EB5 investors and their families took the first step toward a new life in the United States. Various factors since have caused a drop, with 2020 taking the crown for the least new EB-5 investment applications in recent years. Similarly, the factors driving the surge in EB5 investment demand in 2021 are also many.
Why Was EB-5 Demand Down in 2020?
The year 2020 is poised to become synonymous with “COVID-19 pandemic” as we hurtle through to the future. The EB-5 industry was certainly among those in the path of chaos the pandemic left in its wake, with worldwide U.S. embassy and consulate service suspensions effectively halting the EB-5 investment process for countless investors. The pandemic contributed to the fall in EB5 investment interest in 2020, both due to investors consciously deciding to wait until the pandemic subsided as well as shutdowns and lockdowns preventing investors from initiating the process.
COVID-19 was not the sole factor driving the low demand in 2020, however. Another key demotivator for would-be EB-5 investment participants was the Modernization Rule, enacted in November 2021, which pushed up the minimum required investment amount by a whopping 80%. Overnight, the lowest acceptable amount for an EB-5 investment in a targeted employment area (TEA) jumped from $500,000 to $900,000, with the minimum amount for non-TEA investments rising from $1 million to $1.8 million. EB-5 investors rushed to file their I-526 petition before the rule went into effect, resulting in a deluge of applications in October and November 2020 but hardly any in the months following. Demand has subsequently sunk simply due to the numerous applicants who can no longer afford to make an EB5 investment.
Internal issues with United States Citizenship and Immigration Services (USCIS) also resulted in diminished numbers of new investors in 2020. The backlogs were as long as ever, with China, Vietnam, and India impacted at the dawn of 2020. Though the Indian backlogs cleared up in July 2020 and the Indian final action date has remained current ever since, the long wait times at the beginning of the year intimidated new Indian EB-5 investment participants. Furthermore, given USCIS’s utter lack of productivity in adjudicating I-526 petitions, some investors decided the program wasn’t worth the delays and headaches.
Why Is EB-5 Demand Up in 2021?
Just as the reasons for the EB-5 demand depression in 2020 are numerous, so too are the reasons for the surge in 2021. Though the pandemic rages on, the world has begun to acclimatize, and more investors are willing to dive into an EB-5 investment despite COVID-19. But lockdown fatigue isn’t the only reason foreign investors are flocking to the EB-5 program in 2021.
One important factor is the transition of power from the Trump administration to the Biden administration. Whereas Trump was known for his harsh-on-immigration stance, President Biden is seen as far friendlier toward immigrants, and his administration has even released a list of proposed changes to the U.S. immigration system, most of which would be favorable for EB-5 investment participants. The friendlier immigration environment in the United States is conducive to more I-526 filings.
However, the primary reason foreign nationals are choosing to embark on an EB5 investment journey in 2021 is the EB-5 Regional Center Program’s sunset date of June 30, 2021. Historically, the regional center program was bundled up with a broader government spending bill that was automatically renewed upon the approval and passing of a new budget, but Congress divorced the program from the bill when it reauthorized it in December 2020. This leaves the EB-5 Regional Center Program vying for reauthorization on its own and presents the very real threat of termination.
The Possibility of Regional Center Program Termination
The possibility that the popular regional center program will be terminated is more real than ever, but there is hope—namely, in the form of the EB-5 Reform and Integrity Act introduced by Senators Chuck Grassley and Patrick Leahy. If the bill is passed, it will strengthen integrity measures in the EB-5 program to better protect investors, root out fraudulent activity, and reauthorize the EB-5 Regional Center Program through 2024.
Industry leaders see reform as the only viable path to reauthorization. While confidence is high that the bill will be passed, the possibility of termination still looms, and if the program were terminated, it would effectively nullify the ability of many foreign nationals to invest in a permanent life in the United States. As more and more prospective investors learn of the looming sunset date, they rush to file their I-526 petition before it arrives. The EB-5 Regional Center Program will likely be safe, but foreign nationals pursuing permanent residency rights in the United States shouldn’t count on that—making an EB-5 investment before June 30, 2021, is the wisest option.