Economic Development News & Insight


Putting Foreign Capital to Work Through EB-5

/ July 7, 2014

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Putting Foreign Capital to Work Through EB-5

Impact investing holds significant promise for directing more resources to America’s distressed urban core. The EB-5 program could be an effective investment tool to achieve this goal but it is underutilized.

The EB-5 program was created by the U.S. government in 1990 to improve economic conditions, especially in high poverty and high unemployment urban and rural areas, by attracting foreign capital to support investments that create local jobs. Interest in EB-5 as a new investment tool was relatively limited until the recent recession and subsequent contraction of more traditional sources of capital.

Today, there are approximately 440 EB-5 regional centers operating across the U.S. and last year the government received over 6,300 applications to the EB-5 program. A recent report by Brookings estimates that since 1990 the EB-5 program has captured approximately $5 billion in direct investments and created over 85,000 full-time jobs.

Given the lack of publicly available data, it is unclear whether the program has benefited the nation’s most economically distressed areas, including inner cities. The EB-5 program seems to have been largely overlooked by city governments, economic development corporations, foundations and other organizations actively promoting inner city investment.

This may be due in part to the relative obscurity and complexity of the program. The program also unfortunately suffers from a negative reputation due to a few high-profile cases of fraud and the bureaucratic labyrinth associated with many government programs.

In a recent report, “Increasing Economic Opportunity in Distressed Urban Communities with EB-5,” authored by ICIC with support from the Surdna Foundation, Garfield Foundation and Boston Foundation, 178 EB-5 projects across the U.S. were identified including numerous examples of successful projects that could be replicated to increase employment and revitalize urban areas. The report offers a set of recommendations to the community of organizations engaged in impact investing to help them fully leverage this tool and maximize economic opportunity.

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