It was Chuck Schumer to the rescue of New York City developers Tuesday as the popular EB-5 investor visa program, which allows investors to pony up $500,000 in exchange for a green card, came under fire during a senate hearing on Capitol Hill.
Schumer defended the use of the program to fund real estate developments in Manhattan in the midst of claims that it undermined the program’s core objective of creating jobs in economically disadvantaged areas.
“There was an idea that urban areas like New York should not get EB-5 money….that you had to live within a certain area to qualify as a poor person that would benefit,” Schumer said. “That’s not how it works in New York City.”
The issue of whether EB-5 was being put to use in areas with actual low-employment was a sticking point when lawmakers attempted to make changes to the program in December. Some said New York City developers were exploiting the program by drawing special districts to link their fancy condo projects with poor areas, a practice they criticized as gerrymandering.
The program was extended for another year with no changes when an agreement could not be reached.
“People in the South Bronx travel across several census districts to sell food or clean or build an office tower,” Schumer said in defense of EB-5’s use in Manhattan. “Many of them work in office towers in Manhattan. I don’t see why a poor person in the South Bronx should be any less entitled to the benefits of the program than a poor person in Vermont or Iowa or anywhere else.”
But Sen. Patrick Leahy (D) of Vermont questioned whether or not those jobs might have been created without the use of the program.
“In many cases, these projects would be pursued regardless of EB-5, calling into question whether the EB-5 capital is creating any jobs at all,” he said.
Schumer, who recently co-sponsored a bill by Sen. Jeff Flake (R) of Arizona aimed at increasing EB-5 regional center transparency, said he was not opposed to other reforms, such as those calling for greater scrutiny of EB-5 projects and regional centers in an attempt to clean up fraud and abuse. The Securities and Exchange Commission said it filed 19 cases involving EB-5 offerings, almost half of which involved fraud allegations, between February 2013 and December 2015.
“There’s a general consensus on reform,” Schumer said. “I support all efforts to weed out the waste, fraud and abuse where it exists.”
Schumer has strong and lengthy ties to New York City’s development community.
As of December, the state’s senior senator had received $1.09 million in campaign donations since 2011 from real estate interests, according to a recent report by The Real Deal. Fragomen, a law firm that has a prominent EB-5 practice, was his fourth-largest donor and has donated $82,200 to his campaign committee.
Schumer’s donor list also includes the Related Companies and Silverstein Properties, both of whom have established their own regional centers through which to raise EB-5 funds.
Source: The Real Deal