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The Best-Kept Secret in Urban Economic Development
“EB-5 is not a silver bullet for development, but it’s an important tool that communities should understand.”
This was a popular statement echoed by many speakers at ICIC’s July 1st convening, “Impact Investing in Inner Cities: Putting Foreign Capital to Work Through EB-5”. Over one hundred policymakers, economic development professionals, philanthropic leaders and investment experts gathered to discuss how EB-5 is being used to create jobs in the U.S. and the potential the program has to generate greater impact.
Although the EB-5 Immigrant Investor Program was created by the federal government in 1990, it was rarely discussed or utilized beyond major real estate developments until recently. Many in the economic development field have never heard of EB-5 and few understand how it can be used to create jobs in urban communities.
The EB-5 “visa-for-dollars” moniker describes the fundamental incentive within the program: EB-5 visas are granted to foreign nationals who make a significant investment in a business that creates at least 10 full-time jobs. To date, a conservative ICIC estimate suggests EB-5 loans have provided at least $8 billion of direct investment into American businesses and created at least 160,000 jobs. These job creation numbers are far from what they could be. The program allocates 10,000 visas for EB-5 investors per year. But, since 1990, the U.S. has only given out a total of 29,000 visas to EB-5 investors.
The program has been gaining steam more recently, in part due to traditional sources of capital becoming less accessible since the Great Recession. In addition, the rapid growth of impact investors, those seeking investment opportunities that produce financial and social returns, has renewed interest in investment tools such as EB-5.
Given the lack of publically available data on EB-5, ICIC embarked on a research project, with support from the Surdna Foundation, Boston Foundation and Garfield Foundation, to identify EB-5’s potential within urban economic development. ICIC used a combination of qualitative and quantitative research methods to investigate the EB-5 program, the types of projects that have used EB-5 financing, and the economic impact of the projects. ICIC identified 178 EB-5 projects across the U.S., and numerous examples of successful projects that could be replicated to increase employment and revitalize urban areas.
At the July 1st convening, ICIC shared its findings and released its research report, “Increasing Economic Opportunity in Distressed Urban Communities with EB-5”. The report offers recommendations for philanthropic organizations, city leaders, financial institutions, and economic and community development professionals to help them fully leverage the tool and maximize economic opportunity.
Among ICIC’s recommendations are to:
- Develop an educational campaign to increase awareness about the opportunities and challenges of the EB-5 program, particularly in connection with traditional economic development tools.
- Build a nexus of EB-5 experts that could be leveraged in urban areas across the U.S. to provide the necessary technical assistance.
- Identify and invest in EB-5 projects to direct more projects to distressed urban areas, accelerate EB-5 deals in target neighborhoods, and ensure successful outcomes.
ICIC hopes that this report will stimulate a new dialogue about the EB-5 program and how it can be used as a tool for impact investing in inner cities.