Washington, D.C. – House Judiciary Committee Chairman Bob Goodlatte (R-Va.) today delivered the following remarks during the House Judiciary Committee’s hearing on the Department of Homeland Security’s Proposed Regulations Reforming the Investor Visa Program.
Chairman Goodlatte: In 1990, Congress created the Investor Visa Program in order to bring entrepreneurial talent to the United States, create new jobs, and infuse new capital into our economy, especially in hard-hit rural and depressed areas.
Unfortunately, over the years the program has strayed further and further from Congress’s intent and has seen its reputation repeatedly tarnished by scandal. For the past year and a half, I have worked collaboratively with Ranking Member Conyers, Representative Issa and Senators Grassley and Leahy to reform the program and set it on a solid foundation.
Currently, aliens must invest $1 million unless they invest in projects in rural or high unemployment areas, in which case they can invest half this amount. These levels have remained untouched since 1990 – a quarter century ago – never adjusted for inflation or any other factor. As a result, the real value of each investment has fallen by half.
Almost all visas now go to aliens investing at the lower level meant for rural and poor areas. Even when the resulting projects are built in prosperous areas. Regional centers have discovered that they can duct tape together ritzy high-rent districts with distant depressed zones in order that the combined area magically meets the high-unemployment test. The Government Accountability Office has found that 12% of projects qualifying as high-unemployment TEAs in fact tape together over 100 disparate census tracts. GAO also found that more than three quarters of projects in supposedly high-unemployment areas are actually physically located in places with unemployment rates of from 0 to 6%.
This gerrymandering takes place to access cheap capital – aliens don’t care about their rate of return as much as they do procuring green cards. Real estate experts at New York University have concluded that “projects in even the most affluent [areas] are able to routinely qualify for the discounted investment. . . . This . . . gerrymandering rendered the two level investment threshold meaningless and [foreign investors] flocked to invest in luxury projects . . . .”
For example, here is Hudson Yards, a Manhattan mega-development that purchased a four-page spread in the 800 page September issue of Vogue. Based on Vogue’s rack rate, the ad cost Hudson Yards about $800,000. It boasts that:
Hudson Yards will include some of the tallest and grandest towers in the city … Inside, soaring ceilings, walls of glass and ingenious details reflect the highest standards in the residential market … Boasting a collection of restaurants curated by world renowned chef Thomas Keller … Hudson Yards is poised to become the city’s most unique and exciting dining destination … A unique combination of luxury retailers [and] independent boutiques … is being curated … [You can r]ejuvinate in the innovative … luxury spa …
At the Yards’ first condominium project, condos will start at around $1.9 million for 843 square feet and rise to $32 million for the two penthouses. Perhaps in recognition of the huge success of HGTV’s show “Tiny Houses”, the Real Deal — a New York real estate journal — states that “200 of the total 285 market-rate condos are priced at below $7 million. The move is reflective of a general drift in the market towards smaller homes at less ostentatious price[s] . . . .” Things must be tough all over. Of course, Hudson Yards is marketing investor visas for $500,000.
Projects in affluent areas will always be able to compete for foreign investors. Even if aliens have to invest more, they prefer the lower-risk of the investments and the prestigious zip codes. However, if Congress is going to be granting a path to citizenship, we have every right to ensure that a healthy percentage of investments be in rural and depressed areas, as Congress originally intended.
I have been one of the most vocal opponents of the Obama Administration’s executive overreach. However, for the past quarter century, both Democratic and Republican Administrations have engaged in executive underreach when it comes to the investor visa program. Congress gave the Administration explicit statutory authority to raise the minimum investment amounts. Congress gave the Administration the power to determine for itself which areas qualify as depressed, rather than simply delegating away this authority. And yet, no Administration acted – until January.
In one of his last acts, Secretary of Homeland Security Jeh Johnson commendably issued proposed regulations that deliver long-overdue reform.
The regulations propose to raise the minimum investment amount to $1.8 million. While this is higher than what I was willing to accept last year in the spirit of compromise, it is eminently justifiable – merely accounting for inflation over the past quarter century- and far lower than the investment amounts required by our international competitors.
The regulations would also raise the minimum investment amount for rural and high unemployment areas to $1.35 million and effectively end gerrymandering by defining a high-unemployment area as the census tract or tracts in which a project is principally doing business, and, at the discretion of the regional center, any or all census tracts directly adjacent to the project tract, a concept I proposed two years ago.
These regulations deserve to be issued in final form, and I urge the Trump Administration to do so. They will enable the investor visa program to become a turbo-charged engine for economic growth. If, however, the regulations are not finalized and the program remains in disrepair, I am not sure that it deserves to continue.
I look forward to today’s hearing.