This [US EB-5] visa program is a path to citizenship for the rich

2016/04/20 Leave a comment

The US equivalent to the debate in Canada over investor immigration, essentially bad programs that distort local economies with little long-term benefit to the economy:

Big, high-profile real estate developments in America are scooping up funding from an unusual and controversial source: foreign investors angling to become Americans. The EB-5 visa program offers a path to citizenship to those rich enough to invest at least half a million dollars here. But there’s a growing debate about the program, with fierce defenders and critics who cut across traditional partisan lines.

Hudson Yards, a massive complex of office, retail, residential and park space coming together on Manhattan’s far west side, is one current project that benefits from these investments. The $25 billion project—the largest private development in American history—has brought in $600 million from EB-5 visa investors. That number could double by the time the whole project finishes in the middle of the next decade. Related Companies, which is developing Hudson Yards, said the EB-5 money was a “critical component.”

“Think back to when we started this,” said Jeff Blau, Related’s CEO. “In 2009-2010 the economy wasn’t so strong and so that EB-5 capital filled that gap for us.”

Supporters of the program, like Blau, point to the jobs and economic impact their developments create. The buildings at Hudson Yards will house private equity firms and luxury shops, but their bones are steel, manufactured in Virginia and welded into place by workers earning middle-class pay.

The program began in the early 1990s with the goal of bringing in job-creating investments from abroad. For many years it was tiny, well below its annual cap of 10,000 visas. But after the financial collapse, the program exploded, with a wave of Chinese applications.

As the program has grown, critics say too much money is going to real estate projects that benefit the wealthy, such as Manhattan skyscrapers and Vegas hotels.

“It is a program with a lot of flaws,” said Audrey Singer, a senior fellow at the Brookings Institution who has studied EB-5 financing. “It is easy to exploit.”

Foreigners who invest in high-unemployment areas get a break on how much money they have to put in: $500,000 versus $1 million. But developers have found ways to use that money for projects in wealthy areas, through creative drawing of districts called targeted employment areas (TEAs). By creating TEAs that include ritzy neighborhoods along with struggling ones, developers make it easier for foreign investors, but can still build in rich areas. Though legal, critics see this kind of gerrymandering as against the spirit of the law.

Singer says the EB-5 program can be a positive force, but it needs to tighten rules so more benefits go to neighborhoods that need them most. A bipartisan attempt to make changes recently failed, beaten down by the real estate lobby and Congressional supporters in both parties.

So for now, a pricey express lane to American citizenship remains open and the argument will rage on over whether it’s the right way to go.

Source: This visa program is a path to citizenship for the rich

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Plenty of blame to go round in real estate crisis: Mason

2016/03/26 Leave a comment

The (valid) criticism of governments continues.

But at least, the planned StatsCan study will illustrate the extent to which (mainly Chinese) immigration has contributed to increased housing prices:

The B.C. government recently vowed to crack down on real estate agents involved in nefarious practices such as shadow flipping that help to drive up prices. But this is a small measure that will do absolutely nothing to improve affordability. Its primary purpose is to improve optics: Look, everyone, Premier Christy Clark is finally doing something about this mess. The Premier also asked B.C. Housing to look at the impact of foreign investment in the market.

In this week’s federal budget, meanwhile, $500,000 was set aside to help Statistics Canada determine the best way to collect data on international buyers.

It would be comical if it weren’t so sad.

Others, meanwhile, aren’t waiting. This week, two economists from the National Bank produced a study showing as many as one-third of house purchasers in Metro Vancouver last year were from China. But perhaps the most interesting numbers to be revealed lately concern the impact that the immigrant-investor program – both the one run for years by Ottawa (and terminated in 2014) and another that still exists in Quebec – has had on the real estate madness we are witnessing.

Under the program, immigrants can come to Canada in exchange for $800,000, up front, that serves as a five-year loan to the government. The report, brought to light by Ian Young of the South China Morning Post, reveals how completely porous and unaccountable the immigrant-investor system has been. Truly awful might be another way to describe it.

For example, after 10 years the average annual income tax paid by these millionaire migrant investors is $1,400. That compares with $7,500 for the average Canadian. The report notes that after five years, many of these investors have secured Canadian citizenship and returned to their home country.

Quebec accepts about 1,750 such applications annually. After handing over their $800,000, most move to Vancouver and buy real estate. The vast majority of all who have taken advantage of these programs over the years have ended up in British Columbia (by one estimate, nearly 200,000).

Those who have come to Canada acknowledged to federal researchers that their primary motivation for obtaining citizenship was as a hedge against political or economic upheaval occurring in their home country.

The federal government has known about the impact the investor pipeline was having on things such as real estate and didn’t care. It was more than pleased to sell Canadian citizenship to the wealthy. The B.C. government, meanwhile, is only too happy to take rich immigrants through the investor back door that continues to be provided by Quebec. It doesn’t care that it isn’t seeing any of the loan money that immigrant investors have to pay; it is making tens of millions from the insane escalation in real estate prices these immigrants have set off.

Canadians should be furious that their governments allowed this to happen. Now all that these same governments can do is introduce lame measures that will have no meaningful impact on housing prices, but rather are designed to show that government is on the problem!

Except they’re not. And never have been. And hopefully history will judge them harshly for that.

Source: Plenty of blame to go round in real estate crisis – The Globe and Mail

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Study reveals awfulness of Canadian investor immigration; income tax averages C$1,400 per millionaire | South China Morning Post

2016/03/25 Leave a comment

More on Vancouver real estate and investor immigration:

Yet other resultant economic activity is scant – in fact, investor migrants’ favourite “business” is real estate ownership.

Average annual income tax paid by millionaire migrants was C$1,400. No, that isn’t missing a zero

That’s just one finding of a Federal government evaluation of the Chinese-dominated investor schemes, quietly published in October 2014. I can find no reference to the 103-page report in any media; two leading academics who have studied the schemes for years were unaware of it before I forwarded it to them this week.

A skinny internal report on immigrant employment earnings, dating from 2012, gave a hint of what many suspected about the investor schemes, whose only real requirement of applicants was a willingness to hand over a pile of cash (latterly, C$800,000) as a five-year loan to Canada. But the latest data is depressingly comprehensive.

Canada’s millionaire migrants earn less than refugees

Among other things it reveals that 10 years after admission, the average annual income tax paid by millionaire migrants’ primary breadwinners was C$1,400. No, that isn’t missing a zero. The true average is even lower – since one-third did not file tax returns.

Compare that to the C$10,900 paid by skilled worker immigrants, or the C$7,500 paid by Canadians on average.

 Millionaire migrants’ average taxable income from all sources peaks at C$19,500 three years after arrival, but then defies the trend of other immigrant classes by falling sharply, to C$15,800 after 10 years. The report notes “increasing rates of out-migration after five years (especially among investors) may indicate a relationship with obtaining citizenship … a share of these immigrants wait to obtain Canadian citizenship to move out of the country.”

The Quebec backdoor: still open, still ripping off BC

Why does this matter? Wasn’t the federal IIP shut down? Yes, but the QIIP continues to operate and has always been the biggest component of investor migration to Canada. In fact, with 1,750 applications accepted annually, and a hefty backlog, Quebec’s immigration department is on track to funnel about 1,400 new millionaire households to Vancouver per year; that’s down from the 2011 peak, but is about the same average level the city received under both the federal and Quebec schemes in the past decade.

Source: Study reveals awfulness of Canadian investor immigration; income tax averages C$1,400 per millionaire | South China Morning Post

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ICYMI: Caribbean Investment for Citizenship programmes: David Jessop

2016/02/10 Leave a comment

Good overview of the trend among many Caribbean countries to offer citizenship for investors, and the risks and consequences of that approach:

Since then, most Caribbean citizenship programmes have put in place, usually with external support, mechanisms to address these issues, but there remain clear variations in the way programmes operate.

While officials in North America and Europe make clear they have no objection to well run citizenship-by-investment schemes given they have ones of their own, they say they remain concerned, suggesting the possibility of sanctions against any nation unable to ensure their programmes meet international requirements.

Notwithstanding, other conceptual and practical problems remain.

At a purely economic level, it is hard to understand why such schemes are not designed to be sustainable in ways that bring continuing income to the country concerned. Without any residency requirement there is no long-term gain in the form of other taxes or fees. Moreover, in the absence in some cases of the equivalent of an independently controlled sovereign fund able to receive fees from citizenship, one-off income remains unrelated to long-term infrastructural, education or public health care needs.

Secondly, the willingness of some countries to grant citizenship to future generations as well as the applicant means that not only is there no long-term benefit from the passport holder’s descendants, but the issuing nation concerned has little or no idea about the identity or nature of growing numbers of future citizens.

Thirdly, the real danger remains that should it be discovered that a passport has been issued to someone who is on a criminal or terrorism watch list, ordinary citizens may face blanket requirements for visas where none previously existed.

There are also other problems requiring resolution. There is a lack of clarity in some nations about what donations – the preferred route for most applicants – are applied to; there is a plethora of sales agents globally and a need for the regulation of their activities; some countries do not have the capacity to deal adequately with the number of requests being made; few governments join up their promotional efforts with developers to try to encourage investments into productive real estate or tourism projects; high risk investment vehicles are being approved; in some nations opposition parties allege impropriety in relation to who benefits; and most schemes still lack real transparency.

As international views on monitoring money laundering and transparency evolve, and concerns grow about global security, it is likely that countries offering economic citizenship without greater transparency could become the subject of more intense international scrutiny.

It would be wise for the region as a whole to consider carefully how best to balance the understandable desire to create new sources of government revenue, with the wider implications and reputational risk inherent in citizenship-by investment- programmes.

Source: Commentary: The View from Europe: Citizenship programmes – more work to be done | Caribbean News Now

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Millionaire migration to Canada didn’t fall after investor scheme’s axing – it rose, new data reveals | South China Morning Post

2015/08/05 3 Comments

Millionaire_migration_to_Canada_didn_t_fall_after_investor_scheme_s_axing_-_it_rose__new_data_reveals___South_China_Morning_PostMore on the Investor Immigrant Program and how Quebec continues to encourage investor immigration through its own program:

Citizenship and Immigration Canada (CIC) spreadsheets demonstrate that, yes, immigrant investor visa approvals under the federal IIP plunged 42 per cent as the scheme  wound down, falling to a mere 2,541 applicants and family members in 2014.

Yet, astonishingly, overall investor immigrant approvals nationwide were up by 7.2 per cent, hitting 8,762 approvals, the most since 2011.

How? Because, even while Ottawa was hitting the brakes on millionaire migration, the province of Quebec (which runs its own IIP) was hitting the accelerator. And l’accélérateur was winning.

In 2014, Quebec approved a bumper 6,221 millionaire migrants and family members, a whopping 62 per cent increase compared to 2013. It was a near-record year, surpassed only by the 6,292 approvals in 2011.

Quebec’s programme matters to Vancouver, because 89 per cent of Quebec investor immigrants do not end up living there, according to federal data. Most likely end up in Vancouver, assuming those 89 per cent disperse in a fashion similar to their counterparts in the federal scheme.

At this point thanks should go to Richard Kurland, the Vancouver immigration lawyer who has been a relentless pursuer of data that CIC does not prefer to release as a matter of course. The CIC spreadsheets that he shared with me this week were only obtained under access to information requests.

The spreadsheets demonstrate in clear fashion how Quebec has historically approved a majority  of Canada’s millionaire migrants, and has likely approved a majority of those who end up in Vancouver. From 2002 to 2014, Quebec approved 65,151 investor migrants, compared to 45,294 okayed under the federal IIP.

Millionaire migration to Canada didn’t fall after investor scheme’s axing – it rose, new data reveals | South China Morning Post.

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Terry Glavin: Canada’s unhappy affair with China’s princeling millionaires

2015/04/24 Leave a comment

Terry Glavin on the set-for-abuse investor immigrant program, cancelled by the Conservatives and refashioned to address some of the abuse (not convinced that the new Immigrant Investor Venture Capital Pilot Program will completely address some of these issues):

To give you a sense of how absurdly the taboo had throttled Canadian debates it’s instructive to recall the rubbish that was uttered when Harper finally got around to shutting it all down last year with a resolve to start from scratch. Vancouver MP Don Davies, the New Democrats’ international trade critic, accused the government of “damaging Canada’s economy and trade relationships.” Then there was Liberal warhorse John McCallum (Markham—Unionville): “Are Conservatives inadvertently picking on Chinese people?”

China’s massive Operation Skynet fraud squad is now rummaging through Vancouver’s real estate industry. British Columbia’s police agencies won’t say whether they’re cooperating, but even if they were it wouldn’t be easy work. Over its final decade or so, the Immigrant Investor Program drew more than 30,000 Chinese millionaires to British Columbia.

Just one of the unseemly costs of Ottawa’s wheel-greasing for Beijing’s princelings is a sum that might well amount to billions of dollars in no-interest loans that should have gone to British Columbia’s provincial treasury. Instead, the money got spent on thousands of back-door keys the Canada-Quebec Accord made available with a wink and a nod to Chinese millionaires bound for Vancouver, in transit through Montreal.

It says something unflattering all round that what we know now about Canada’s immigrant-investor courtship of Beijing’s princelings is mainly due to the courage and persistence of a single reporter

Contrast that with the marquee billing given to the gluttonous wastrel Mike Duffy, a senator facing criminal charges that may or may not involve the prime minister’s former chief of staff having improperly repaid the federal treasury for travel and living expenses that Duffy may or may not have improperly billed the taxpayer, to the amount of $90,000. It’s a gripping yarn and dozens of journalists are on the story, but it says something unflattering all round that what we know now about Canada’s immigrant-investor courtship of Beijing’s princelings is mainly due to the courage and persistence of a single reporter.

Ian Young, Vancouver correspondent for the South China Morning Post, has been almost alone in chasing down the immigrant investor scandal. It was Young who recently ferreted out the data demonstrating that Canada’s investor class immigrants, about 80 per cent of whom are Chinese millionaires, appear to have contributed less to the federal treasury over the past quarter of a century in tax on earnings than the bedraggled refugees Canada admitted over that period.

Nobody seems to even know where all these bigshot investors have gone. Surveys by the China Merchants Bank show that nearly a quarter of Mainland China’s millionaires had already emigrated by 2013, but vacancy rates in Vancouver’s posh new condo districts are perhaps 30 per cent. The city doesn’t keep track, but University of British Columbia geography professor David Ley has been tracing the relationship between the rise in Vancouver residential property prices and the influx of immigrant investors over the years. The lines run in direct lockstep.

Terry Glavin: Canada’s unhappy affair with China’s princeling millionaires

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