Cities Turn To EB-5 To Create Affordable Housing Developments

Cities such as Miami are looking to utilize the EB-5 Program to build more affordable housing developments.

According to the U.S. Department of Housing and Urban Development, an affordable housing community is considered affordable if the homeowner pays less that 30% of their income for housing. 

The lack of low-income and medium-income housing in many cities is becoming a problem. Many buildings that once served these individuals in these income brackets are being torn down and sold for land value or they're being converted to luxury housing. Additionally, the majority of new developments being built fall into the luxury-housing category.

Cities are looking at EB-5 funding as a solution to create affordable housing developments for teachers, police, and veterans.

The EB-5 Program offers developers an incredible opportunity to tap into low-interest capital for their low-income affordable housing developments if they can meet certain EB-5 criteria. This is especially true nowadays when alternative avenues of funding are no longer available and government budget cuts are increasing.

Most of the EB-5 investors are wealthy individuals from Mainland China who are looking to obtain U.S. permanent residency (green card status) in return for their investments.

These Chinese investors receive green cards for themselves and their families after they've invested the capital into an EB-5 project and it's created 10 jobs for qualified U.S. workers within two years.

Since the primary focus of the EB-5 investor is to obtain a green card, the majority of investors want, one, the lowest investment amount possible, and two, they want as little risk as possible.

  1. Therefore, EB-5 investors typically look for EB-5 projects located in targeted employment areas (TEAs), also known as rural or high unemployment areas,  in order to take advantage of the lower capital requirement ($500,00 versus the non-TEA investments of $1,000,000). Please note, however, that many states allow developers to create their own blocks of designated areas, meaning that they can essentially combine high employment urban neighborhoods with high unemployment neighborhoods to create one block, then build in the high employment neighborhood, and it will still count as a TEA.
  2. And, they look for projects that aren't overly complicated and risk meeting job creation requirements.

Without EB-5 funding, affordable housing developments are difficult to obtain financing for because they have to compete with luxury developments. However, as cities, such as Miami, are noticing, turning to the EB-5 Program for funding may be the solution they need to start more affordable housing developments.

 

 

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