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President Trump’s plan to sell green cards for $5 million each, a program he is calling a “gold card,” has largely been met with a shrug. It’s not clear exactly how the program would work, if it’s legal or how many potential immigrants would really pay $5 million for a path to U.S. citizenship.
Howard Lutnick, the commerce secretary, said on Tuesday that the plan to effectively sell green cards would replace the EB-5 investor visa, a favorite source of funding for major real estate projects.
Massive developments — from New York’s Hudson Yards to the San Francisco Shipyard to, yes, Trump Plaza in Jersey City — have been financed in part by overseas investors applying to the EB-5 program, which grants permanent U.S. residence. Such investors are motivated by a green card, not by maximizing returns, and so for developers their capital tends to be less expensive than borrowing money from a typical commercial lender.
The real estate company owned by the family of Trump’s son-in-law, Kushner Capital, drew scrutiny for its use of EB-5 funding during the first Trump administration.
Overall, the EB-5 program does not bring in a lot of money — about $4 billion last year in the context of the $28 trillion U.S. economy — but it represents a huge profit bump for a small but powerful political contingency: major real estate developers. They are not likely to see EB-5 killed without a fight.
“Cheap capital is the crack cocaine to the real estate industry and probably every other industry,” said Matt Gordon, the C.E.O. of E3iG, which advises both foreign investment-based visa applicants and U.S. companies seeking funding.
They and their rather large political donations are going to be very motivated.
EB-5 visas were established in 1990 to encourage investment in rural and economically depressed areas. Foreigners who invest either $800,000 or $1.05 million, creating at least 10 jobs, are eligible. Initially, that meant directly creating 10 jobs. Now most companies meet the requirement by showing the overall economy will gain 10 jobs as a result of each investor’s funding.
News of Trump’s gold card plan sent this ecosystem reeling. “Naturally the whole world is panicking,” said Ishaan Khanna, the president of the American Immigrant Investor Alliance, a group that lobbies on behalf of EB-5 investors. “As India and China woke up, my phone blew up.”
Everybody I’m hearing from is like ‘rush’ — get in as much as you can, be cause who knows how long the program will last in its current form, Gordon said, “On both the sponsor side and on the immigrant side.”
Developers who qualify for the program win big savings. For example: One project Gordon is working on, a $100 million 19-story apartment building, qualifies for about $35 million of EB-5 funding. Traditional mezzanine debt financing for such a project might come with an interest rate of 10 or 12 percent, Gordon said, but the developer will pay 5 to 7 percent for EB-5 funding. “You’re really cutting, you know, 30 to 50 percent of your cost of capital, on a rather significant portion of your capital,” he added.
On top of saving money, developers say the program has been crucial during periods like the financial crisis when other funding sources become prohibitively expensive or scarce.
Such programs aren’t unusual. Seventy countries exchange permanent residency or citizenship for investments or donations, according to Kristin Surak, an associate professor at the London School of Economics who studies so-called golden visa and passport programs worldwide. In some countries, including Malta and Cyprus, the programs represent a significant part of the economy.
