Atlantic Yards Report had a long story yesterday (it doesn’t have any other kind) about how the Brooklyn Nets‘ arena developers are looking to do another round of EB-5 financing, the mechanism that allows foreign investors — mostly Chinese, in this case — to jump the line for green cards if they’ll extend interest-free loans to U.S. development projects in blighted neighborhoods. It’s well worth a read if you’re interested, especially for the bit about how the Chinese government will actually be benefitting from this as a co-investor, but I just wanted to call out this quote it pulls from an article last year by Dartmouth business professor John Vogel:
One of the oddities about the EB-5 program is that the U.S. government is giving out the green cards, but the entrepreneur who puts together the investment gets the money. This scheme seems inefficient and open to corruption. If our government really believes that it is a good idea to sell green cards, maybe we should drop the pretense that this is a job creation program. It might be more efficient to have the money go directly to the U.S. Treasury and reduce the deficit by billions of dollars a year.
This is actually an excellent way of looking at it: Green cards are a public asset, one that the government mostly chooses to give away in order of application, but which here are being handed out in exchange for investment cash. In other words, the government is selling green cards, but it’s not getting the money — that’s going to private developers.
Now, you can say that it’s encouraging private development in places that need it (though it’s tough to imagine anyplace that needs a hand in promoting development less than Brooklyn), but still, is that the most efficient way to get housing built? Vogel suggests using the money to reduce the deficit, but it could equally be used for government construction projects, or jobs programs, or just handing out cash to poor people. It’d be nice to see a cost-benefit analysis of this, but somehow I doubt the lobbyists who helped institute EB-5 in the first place are going to be pushing for funding of that.