Are we playing musical chairs again?
Houston EB5 would like to share valuable EB-5 Visa availability information from the US Department of State (DOS). The data was recently provided to IIUSA, the premiere industry association of Regional Centers, by Dr. Michael Hanley, a Data Scientist from the DOS Immigrant Visa Control and Reporting Division. In this blog, we provide a step-by-step analysis of DOS’s Visa Availability Report as it might help you avoid a Reserved Visa Retrogression. As noted in a previous blog, the monthly Visa Bulletin is grossly insufficient in displaying upcoming retrogressions as it’s based on the number of visas issued and doesn’t account for the number of investors who have applied and are currently in line. We are glad to assist you as informed decisions regarding the project type can make a profound difference in the speed and success of your EB-5 immigration process.
What is visa retrogression?
EB-5 Visa retrogression occurs when there are more people applying for EB-5 Visas from any given country than there are available visas for said country in a given fiscal year. As a result, the U.S. government puts a hold on issuing more visas, causing a backlog or delay for applicants. This delay can vary in length due to factors like the annual total number of visas or high demand from applicants from a specific country. It essentially means that prospective EB-5 Visa recipients have to wait longer than usual to receive their visas, akin to a traffic jam in the immigration process. This is a very similar situation to the EB-2 and EB-3 retrogressions facing Indian born applicants.
Retrogression is something to avoid at all costs because it creates substantial challenges and uncertainties for EB-5 Visa applicants: affecting their immigration plans, financial stability, and overall well-being. The good news is that applicants can protect themselves against the risks and effects of retrogression by analyzing which EB-5 categories have the most visas available.
What are the new EB-5 categories on the Visa Bulletin?
Reserved EB-5 Visas
To direct foreign investment to where job creation is needed the most, the EB-5 Reform and Integrity Act of 2022 (RIA) established three Reserved Visa Categories and assigned 32% of all EB-5 Visas to them. The Reserved Visas are also known as “Set-Asides” as 20% of all EB-5 Visas are earmarked for projects in Rural areas, 10% for projects in areas with High Unemployment, and 2% for Infrastructure projects. Also, the RIA mandates that EB-5 Petitions for Rural projects be given priority processing (goal of 4 months). This is not surprising, as the two US Senators that sponsored the law, Chuck Grassley (Republican, Iowa) and Patrick Leahy (Democrat, Vermont) are from rural states.
The areas where the U.S. Congress wants to direct EB-5 investments are known as Targeted Employment Areas (TEA). Both Rural and High Unemployment areas are considered TEA’s. Since job creation is needed most in these locations, the TEA minimum investment amount is US $800,000, instead of the US $1,050,000 required for affluent areas. Although the lower TEA investment benefit has been part of EB-5 since its inception in 1990, the added incentive of Set-Asides was created by the RIA.
Unreserved EB-5 Visas
Along with the creation of the Reserved Visa Categories, the US Citizenship and Immigration Service (USCIS) also created the Unreserved Visa Category. It consists of 68% of the annual allotment of EB-5 visas to be issued. This category includes pre-RIA and non-TEA EB-5 investors. Post-RIA, Unreserved I-526E Petitions require a minimum $1,050,000 investment and may not get processed as fast as TEA projects. Furthermore, if you were born in China or India, there is currently a 6+ year retrogression as pre-RIA applicants have all been assigned to this category.
FY2024 EB-5 Visa Availability
Now that you understand the different categories of EB-5 Visas on the Visa Bulletin, let’s analyze the breakdown of the number of visas and spaces for applicants per category. We are using specific assumptions with data given from DOS, USCIS, and our own experience-based estimates for the breakdown of petitions filed per category. One must carefully analyze this data to know if a retrogression currently exists because the Visa Bulletin reading ‘Current’ for all Reserved Categories is very misleading.
The extra visas come from unused EB-5 Visas from the Regional Center program lapse and family-based visas from Consulate closures during the pandemic. As you may see from the table above, any unused Reserved Visas will carry over to the next fiscal year’s Reserved Category, and then to the succeeding fiscal year’s Unreserved Category, if unused for two consecutive years.
Unless we understand the innerworkings of the Visa Bulletin and how the EB-5 program is awarded visas, a casual review of the table above might lead one to think that with so many visas available, the type of project does not matter. This could not be further from the truth.
DOS estimates that 8,113 Reserved Visas will be available in FY2024, and demand for EB-5 investments in projects that qualify for Reserved Visas is growing fast. This is not only because of the lower investment amount, but because news is spreading that post-RIA I-526E Petitions for Rural projects are being processed in 4 to 12 months, far quicker than pre-RIA I-526 Petitions. There are recent changes at USCIS that show their commitment to reach the RIA mandated 120-day turnaround average processing time for I-526E Petitions in Rural projects. The USCIS hasn’t been able to consistently deliver on this time frame, however, we are starting to see encouraging progress.
Since there is a 7% visa cap per country, China and India became oversubscribed pre-RIA. If it were not for the RIA Reserved Visa Categories, new EB-5 investors from these two countries would also have to wait several years for a visa. Even though by looking at the November Visa Bulletin one will see all EB-5 Reserved Categories as “Current” for India and China, our analysis explains how a visa retrogression is already existing and predicts what is going to happen in the near future based on the latest available data.
Reserved Visa Availability by Category
To understand how many visas are available per Reserved Visa Category, we must apply the Set-Aside percentages of 20% Rural, 10% High Unemployment TEA, and 2% Infrastructure to the 8,113 (32%) total visas available reported by the DHS.
High Unemployment: A High Unemployment TEA is an area (defined as an individual census tract or group of adjacent tracts) whose unemployment level exceeds that of the national average by 50%. The DOS estimates 2,535 High Unemployment Visas will be available in FY2024. Before the passing of the RIA, projects in High Unemployment TEAs (previously referred to as Urban TEAs) were plentiful as the law made no differentiation between Rural and High Unemployment TEA projects in terms of processing times or Set-Aside visas. In other words, there were already many legacy High Unemployment TEA projects on the market when the RIA was passed. It is therefore reasonable to assume that the majority of early post-RIA applicants have applied through High Unemployment TEA projects given the larger supply of projects in the market at the time.
Rural Projects: The DOS estimates 5,071 Rural EB-5 Visas will be available in FY2024. For a project to qualify as Rural, it must be outside the limits of a Metropolitan Statistical Area and cannot be in a town of more than 20,000 people. The pre-RIA EB-5 market gravitated heavily toward High Unemployment TEA projects rather than those in more rural areas. Therefore, there were few Rural projects available upon reauthorization of the EB-5 program after the RIA was passed. However, now that we are 1.5 years post-RIA, we see the Rural supply blooming fueled by rapidly increasing demand. Although advantageous for visa purposes, Rural projects face inherent challenges like lack of supporting infrastructure, increased construction costs due to lack of skilled labor, and lack of potential demand. Therefore, as explained in a previous blog, the location of a Rural project is an extremely important factor.
Infrastructure Projects: The number of Reserved Visas available for this category is very small (507 EB-5 Infrastructure Visas) as shown in the table above. There is still a lack of clarity regarding what types of projects qualify as Infrastructure, other than the project needs to be sponsored and administered by a government entity. Since all EB-5 investments must be at-risk, you must be aware that government sponsorship does not mean “government guaranty.” We know of no Reserved Visa Infrastructure projects at the time of writing this blog in late October 2023.
Investor spots vs. Visas Available
Let’s bear in mind that the numbers of Set-Asides available in Table 2 represent visas available, and not EB-5 investors. For instance, the family of an investor, his spouse, and their two unmarried minor children will take four visas. Therefore, we must convert visas to number of investors to be able to relate visa availability to the number of post-RIA investors already in queue.
We will be using a conversion factor of 2.8, instead of the historical 3.3 members per family, as there are many singles applying for EB-5 lately. This is because the RIA allows EB-5 investors with an existing visa in the US to Concurrently File for Adjustment of Status and receive their work permit in about 3-6 months. Therefore, most of the recent demand we are seeing is coming from investors that have H1-B (skilled workers) and F-1 (student) Visas. Many of these applicants are single, or have children that are already born in the US and therefore do not need a visa.
We finally estimate that the 8,113 Reserved Visas would serve the needs of about 2,900 EB-5 investors.
Breakdown of I-526E Petitions Filed
According to data obtained from the USCIS, there were 1,898 post-RIA I-526E Petitions pending at USCIS at the end of Q3 FY2023 (through June 2023). Given that Q4 data is not yet available, we used the quarterly average to estimate that 632 I-526E Petitions were filed in Q4 FY2023 ending September 30th. Therefore, we believe that there must be at least 2,530 I-526E Petitions that have been filed up to the end of FY2023. Since only approved I-526E Petitions will receive visas, we have applied a historical approval rate of 83% to be able to correlate I-526E Petitions to available visas, resulting in 2,100 I-526E Petitions to be approved.
When factoring the average number of visas per EB-5 petitioner, these 2,100 I-526E Petitions to be approved represent nearly 5,900 visas out of the 8,113 total visas available for FY2024. Below in Table 4 is an estimated breakdown of I-526E Petitions already filed per Reserved Categories. We assume that 67% of petitions to date are for High Unemployment projects as this is the most common type in the market and was a majority of the projects that were available when EB-5 investors could resume submitting their petitions again. We assume that 30% to date are for Rural projects, which is an emerging category and will likely quickly catch up to High Unemployment projects in the coming months. Given the price sensitivity of the EB-5 market, we assume only 3% for Unreserved Visas due to the higher investment amount of US $1,050,000.
High Unemployment TEA Deficit Setting In
The conversion of I-526E Petitions approved to total visas gives us insight to how many Reserved Visas will be accounted for. As shown below, even if there are no more I-526E Petitions filed after 9/30/2023, as the petitions in the pipeline get approved, there will still be a deficit of about 1,400 High Unemployment Visas. On the other hand, there will still be surplus of over 3,300 Reserved Rural Visas available.
This does not necessarily mean that you will not get a High unemployment TEA visa in FY2024, as not all countries are affected equally as we will explain below.
Estimate of I-526E Petitions for China, India, and Rest of the World
From our experience and what we are seeing in the market, we estimate that 70% of I-526E Petitions filed have been from Chinese or Indian EB-5 investors, at an equal split between them. Historically, China has been the single largest country of origin for EB-5 investors, accounting for 85% of all I-526 Petitions in FY2015, which is when news of their initial retrogression set in. After that, China’s share steadily decreased to 11% in FY2020. However, news of Reserved Visas has caused their demand to explode in recent months.
India-born investors already accounted for 23% of I-526 Petitions in FY2020. India’s demand has skyrocketed as there are more than 779,000 India-born highly qualified workers in the USA. Most of them are H-1B Visa holders who would have to wait several decades for an EB-2 or EB-3 Permanent Green Card to be available. Now with a Concurrent Filing of an Adjustment of Status through EB-5, they can quickly receive the advanced benefits of a Green Card. In as little as 3-6 months, they can receive their Employment Authorization Document (EAD) that would allow them to freely change jobs in addition to their Advance Parole (AP) which allows them to travel.
Our estimate of the number of visas to be taken by Chinese and Indian investors is shown below. It reflects our already mentioned High Unemployment versus Rural split.
7% Per Country Cap per Reserved Visa Category
What most EB-5 investors do not realize is that just as there is a 7% per any given country cap for all EB-5 Visas, there is also a 7% country cap per Reserved Visa category. What this means is that only 7% of the number of visas for a specific category are guaranteed for said country. There could be more, but only if other countries do not meet their allocation. Below is the “first 7% cap” estimate for any country based on the DOS FY2024 Visa availability. As you can see, only 63 investors per country are guaranteed to avoid retrogression via a High Unemployment project. The same is true for 127 Rural EB-5 investors from each country.
As said, EB-5 investors from oversubscribed countries that do not make it in the “first round” could still receive a Reserved Visa in the category of their investment but only if the remaining visas of such category have not been taken by other countries that have not exceeded their 7% allocation.
High Unemployment TEA Reserved Visa Retrogression for China, India, and Rest of the World
From the table below, we can clearly see that there are not enough available High Unemployment TEA Visas to meet the needs of all the EB-5 investors from China and India that have already filed their I-526E Petitions. Based on our projection using currently available data, each of these retrogressed countries will face a deficit of about 752 visas respectively even after absorbing visas from other countries that have not exceeded their allocation, affecting some 269 investors from each respective country. In other words, there will be an unmet demand of about 1,500 High Unemployment Visas, and about 540 Chinese and Indian EB-5 investors in total will be retrogressed.
These 752 unmet visas could result in a 5 to 10 year wait for Indian and Chinese EB-5 investors. Let’s remember that because of roll-over and carry-over visas, FY2024 has a record high number of EB-5 Visas available. Therefore, the current High Unemployment country cap is about 177 visas. However, moving forward we shall expect this cap to be of only 70 to 140 visas per country. Therefore, Chinese and Indian investors in High Unemployment projects may already be looking at a 5 to 10 year wait which may continue to grow depending on demand from other countries in future years. (752 Retrogressed High Unemployment Visas / 70 Available Visas per Year = 10 years to clear Backlog).
No Retrogression for China and India in Rural Projects
However, our analysis indicates that there will not be a retrogression occurring for Chinese and Indian EB-5 investors in Rural projects in the immediate future. As of now, every EB-5 investor that has already filed their I-526E Petition with a Rural project should be able to avoid retrogression, including those from India and China.
Even when a retrogression does occur, the backlog will clear faster given that Rural projects have twice as many visas Set-Asides for them compared to High Unemployment projects.
Rural EB-5 Visas with Priority Processing
Furthermore, our projection on currently available data shown above indicates that there should be over 3,300 Rural EB-5 Visas available to benefit nearly 1,200 Rural project investors worldwide (3,300 / 2.8 Visas per Investor). This means that there should still be plentiful visas for Chinese and Indian EB-5 investors that decide to subscribe to Rural projects soon.
If you are interested in learning more about Rural EB-5 projects, we recently published a White Paper analyzing the top Rural areas in the US for EB-5 investments using data from think-tank Heartland Forward’s comprehensive research. Rural EB-5 projects are very different from what the investor markets have been used to for years: High Unemployment/Urban TEA projects. This analysis can help prospective investors select the safest area to invest in as Rural information tends to be scarce. For further information about how to mitigate risks associated with Rural EB-5 projects and selecting a safe project, please check out our previous blog.
When considering the advantages of a Rural Targeted Employment Area project in Texas, you may want to consider “The Frederick” in Fredericksburg. This EB-5 Rural project, nestled in the heart of the Texas Hill Country is near major cities like San Antonio and Austin. With over 1.2 million visitors flocking to Fredericksburg each year, it has established itself as a premier Texas destination.
This project is already more than halfway subscribed and there are limited EB-5 spaces available. If you are interested in becoming a part of this exciting opportunity, don’t hesitate to reach out to a member of our team.
Please understand that the contents of this blog do not constitute either investment or immigration advice. At Houston EB5, we are glad to put more than 75 years of collective EB-5 experience at your service. Our leaders, and most of our staff, are immigrants as you are and understand your need for clear and precise information. Please feel free to book a call by clicking here.