Developer Money Crosses the Lines?Real Estate: Projects draw ‘low-income’ maps to tap EB-5. Monday, November 4, 2013
Marina del Rey is one of the wealthiest areas in Los Angeles County, and it would be hard to choose a vantage point from which this fact is more obvious than at Via Marina and Tahiti Way, the last vacant lot in the marina.
In one direction, one can look out at the water and see rows of yachts and sailboats lined by luxury apartments. To the left is a rental complex where residents pay more than $6,000 a month and enjoy a heated saltwater lap pool and private massage rooms. In the residences to the right, a concierge delivers groceries and dry cleaning to residents.
It is little surprise, then, that a developer wants to build a hotel on this four-acre property. What is surprising is this: The project is getting perks through a federal program designed to help jobless neighborhoods.
Developer Hardage Group has convinced government officials that the Marina del Rey site is in a high-unemployment area. It’s done so by claiming that South Los Angeles and Crenshaw, poorer neighborhoods as far as 15 miles away, are part of its project area. The project is one of several in wealthier parts of Los Angeles County that have gerrymandered project areas to qualify for the perks, according to documents obtained through records requests by the Business Journal.
Critics say that by cobbling together these zones, developers are subverting the intent of the rules and are benefiting despite creating jobs away from where they are most needed.
The developers are taking advantage of provisions in a federal investment visa program known as EB-5, which lures foreigners to invest in job-creating projects in the United States in exchange for green cards. The program encourages investment in economically needy communities by giving projects in those areas big advantages in attracting overseas investors.
But developers have been allowed by state and federal officials to claim their projects are in jobless areas by creating maps that can span nearly a dozen cities, drawn specifically to include poor neighborhoods. After getting approved, some of these developers have gone on to secure millions in foreign investment through the program.
“The point of all this is that it was supposed to bring investment to truly depressed parts of the country that needed them,” said David North, a fellow at the Center for Immigration Studies in Washington and a frequent critic of the program. “This is distorting the program.”