EB-5 Capital Gerrymandering of Targeted Employment Areas

In her book Extrastatecraft, American urbanist Keller Easterling used this new-coined term to describe undisclosed political and financial activities in partnership with statecraft. In this article, the team uses Extrastatecraft as a conceptual framework, to investigate EB-5 capital gerrymandering of targeted employment areas across US cities. We use the data from the American Community Survey to analyze the differences in unemployment rates before and after the so-called EB-5 projects and proposed a way of evaluating the funding model in the conclusion section.

What is EB-5?

There is Such Thing As Free Lunch!

In 1990, the U.S. Congress created the fifth employment-based (i.e., EB-5) preference immigrant visa for foreign nationals eligible to become lawful permanent residents (or green card holders) by financing a “new commercial enterprise“ that will employ at least 10 American workers. For each EB-5 visa, one must invest at least $500,000 ($900,000 since 2019) through regional centers.

Illustration by Isabel Espanol

The regional center is a federally approved agent, often a private third-party, taking a commission from developers to connect them with foreign investors. Researchers at the Center for Real Estate Finance Research at New York University found that 99% of the immigrant investor involved in the EB-5 program invest in the targeted employment area (i.e., TEA). The EB-5 program did not gain popularity until the 2008 housing bubble drained conventional sources of capital. The EB-5’s purpose is not only to stimulate the U.S. economy through the creation and capital investment but to raise funding to invest in high unemployment areas. However, the US government decided to turn a blind eye on the qualification of regional centers and their standards on qualifying TEA as a way for the real estate market to recover from the financial crisis.

EB-5 Capital Gerrymandering and Consequences

Costing a total of $25 billion, Hudson Yards is the most expensive real-estate development project in US history. The primary developer of the 26-acre West Side Yards in midtown Manhattan is Related Companies – one of the largest developers in the US –and Oxford Property Groups. In addition to the investment capital of these developers, Hudson Yard collects $1.6 billion from the fifth employment-based (EB-5) visa program, the Golden Visa providing a fast track to trade US residency and citizenship with wealthy foreign investors for investment capital. In January 2017, the CityLab published a document revealing the joint census tracts to qualify Hudson Yard as a Targeted Employment Area. The map included in the document illustrates a highly selective manipulated boundary to qualify Hudson Yards as a TEA.

Public Advocate Jumaane Williams said Hudson Yards was cynically gerrymandered into a zone for “distressed areas,” linking it to public-housing in Harlem so that the new mega-development could quality for a visa program benefiting wealthy foreigners. (Photo by Tequila Minsky)

As a result, the unemployment rate is boosted from 5.0% to 12.6%, almost three times the national unemployment rate (4.4%) in the same year. The extremely odd route consists of 12 census tracts, five of which locate in Harlem 70 blocks away from the EB-5 funded projects in Hudson Yards. To make the Hudson Yards’ gerrymandering a more appealing case for USCIS for EB-5 funding, Empire State Development assists The Related Companies to include Central Park, a blank in the census database. The players committing such forms of gerrymandering range from private developers to state agents, taking up undisclosed economic and financial activities in partnership with the sanctioned authorities of the state.

The threshold unemployment rate to be eligible for TEA in 2013 (150% national average).

6.6%

Now Hudson Yards reaches

5.0%

The threshold unemployment rate to be eligible for TEA in 2013 (150% national average).

6.6%

Now Hudson Yards reaches

5.6%

The threshold unemployment rate to be eligible for TEA in 2013 (150% national average).

6.6%

Now Hudson Yards reaches

7.6%

The threshold unemployment rate to be eligible for TEA in 2013 (150% national average).

6.6%

Now Hudson Yards reaches

12.6%

Multiple state agencies are involved in the lawful yet unethical act of EB-5 capital gerrymandering. In a neoliberal market, social risks such as poverty and unemployment fall into the domain of self-care problems. Communities of color in Harlem remain highly unemployed as the historical causality of systemic racism.

The non-white population mostly lives in upper Manhattan, whose neighborhoods become an easy target for the Hudson Yards gerrymander plan. In 2016, Manhattan sees an increase of 1.8% employment rate on average. In contrast to this narrative, the West Harlem neighborhood within the conjoint tract turns into a TEA. Although the five Harlem neighborhoods within conjoint tracts see an average increase of approx. 0.96% of the employment rate, the flux is still far below the city average. With $1.6 billion investment and 19,000 jobs created around the development of Hudson Yards, these five neighborhoods remain omitted.

Before Gerrymandering: Unemployment rate at Hudson Yards is 6.2%

After Gerrymandering: Unemployment Rate at Hudson Yards qualified as 12.6%

Most EB-5 projects in Manhattan do not help create jobs in the actual Targeted Employment Area, researchers at Center for Real Estate Finance Research at New York University found.

Further studies at the center suggests that 99% of the EB-5 projects follow this same pattern: random location with low-unemployment rate without adding up employment in the tracts it gerrymanders.

How it Works

Financial Gerrymandering in New York City

At its core, EB-5 is a job-incentive policy yet fails to translate the employment figure into its target geography. Multiple state agencies are involved in the lawful yet unethical act of EB-5 capital gerrymandering, which further registers Hudson Yards as an extractstatecraft, and Harlem as a free lunch for everyone, every full-human as synonymous with white, western man. In the neoliberal context, social risks such as poverty and unemployment fall into the domain of self- care problems, and the state intervenes in redirecting capital in a reverse robinhood fashion and withdraws when confronting the pressure of real estate and capital.

9

Steps to understand what went wrong with EB-5 mechanism

1

International investors directly deposited funds to the Federal Government

2

Federal Agencies then would collect it and release the Visas

3

Targeted Employment Areas would use the funds for projects to create at least 10 jobs per investment

4

Such projects would be be key elements for the development of needed neighborhoods

5

The ideal was to recover unemployed areas and improve livelihood

6

Developers and Regional Centers partner for specific projects

7

Developers and Regional Centers trace new boundaries to allocate the money in projects with high profit

8

Such projects usually do not contribute to improve underdeveloped areas

9

Status Quo remains, as underprivileged areas do not receive investment from EB5 or any other funding

To examine whether the EB-5 formula we find in Hudson Yards is applicable to cities across the US, we investigate another five EB-5 projects in Los Angeles, Orange County, Jersey City, and Boston. Here are the case studies.

Case Studies

Financial Gerrymandering in the United States.

Hudson Yards

New York City

Waldorf Astoria

Los Angeles

The Point

Boston

Trump Jersey City

Jersey City

The Source and The Peace Hotels

Los Angeles

Conclusions

What is next?

In 2019, the Department of Homeland Security published an EB-5 amendment, intending to regulate the regional centers and limit the gerrymandering practices of TEA. Although it was supposed to come into effect on November 21, 2019, President Trump signed a law extending the Regional Center Program through December 11, 2020. The future of EB-5 is still uncertain, but its potential effect to distort and reconfigure the geography of economics and racial justice still exists at a national level. Based on our case studies, we realize that some TEAs have witnessed an unemployment rate decrease after an adjacent EB-5 project was completed. More cases show otherwise. Therefore, we would like to propose to evaluate regional centers based on their ability to mitigate the unemployment reality, instead of the EB-5 capital they can allocate into the market.

The repairment of EB-5 is overdue. How else can it be fixed?

Acknowledgements

This website and its contents are devised by MIT SMarchS Urbanism candidates Wuyahuang Li, Olivia Serra, and Alberto Meouchi for subject 11.454 Big Data, Visualization, And Society. This project would not have been possible without the fruitful conversations and support we received from the teaching team, Sarah Williams, Yuan Lai, Trish Cafferky, Yanchao Li, and Lily Xie. In particular, we want to thank Rania Ghosn and Melissa Soto for their help with the early project development. The data we used for the visualizations are from the American Community Survey, U.S. Census Bureau, Department of Commerce, Statista, U.S. Citizenship and Immigration Services, and studies conducted by the Center for Real Estate Finance Research at New York University's Stern School of Business. As the EB-5 capital gerrymander documents can only be acquired via FOIA, we source these documents from reliable journalism media, i.e., The New York Times, Washington Post, The L.A. Times, and CityLab, as our primary source. The visualization code on race distribution is adapted from spatial data scientist Kyle Walker's work.

Datasets

American Community Survey (for unemployment rate and race distribution)

US Census Bureau, Department of Commerce (TIGER/Line Shapefile, Census Tract State-based Shapefile)

US National Unemployment Rate since 1900

https://www.statista.com/statistics/193290/unemployment-rate-in-the-usa-since-1990/

Full list of Regional Centers (including the ones been canceled)

https://www.uscis.gov/working-in-the-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/eb-5-immigrant-investor-regional-centers/approved-eb-5-immigrant-investor-regional-center

Qualitative EB-5 Case Study by NYU Stern School

https://www.stern.nyu.edu/experience-stern/about/departments-centers-initiatives/centers-of-research/center-real-estate-finance-research/research/eb-5-research/

Case Studies

65 Beacon Street, Jersey City, NJ

https://www.latimes.com/business/la-fi-kushner-eb5-20170601-story.htm

Hudson Yards, New York City, NY + Waldorf Astoria Beverley Hills, Los Angeles, CA

https://www.bloomberg.com/news/articles/2017-01-31/how-to-fix-the-eb-5-cash-for-visas-immigration-program/

Pierce Point, Boston, MA/

https://commonwealthmagazine.org/economy/sketchy-federal-program-sells-citizenship/

The Source + Pasea Hotel, Orange County, CA

https://www.ocregister.com/2015/10/13/need-a-fast-track-to-citizenship-invest-in-these-orange-county-luxury-hotels

Visualization Code

https://github.com/walkerke/mb-immigrant