Kriston Capps is a staff writer for CityLab covering housing, architecture, and politics. He previously worked as a senior editor for Architect magazine.
Manhattan’s new luxury mega-project was partially bankrolled by an investor visa program called EB-5, which was meant to help poverty-stricken areas.
Since its official unveiling last month, critics have been teeing off on Hudson Yards, the $25 billion office-and-apartment megaproject on Manhattan’s West Side. The Guardian’s Oliver Wainwright calls it “bargain-basement building-by-the-yard stuff that would feel more at home in the second-tier city of a developing economy.” In Curbed, Alexandra Lange writes that it suffers from “no contrast. No weirdness, no wildness, nothing off book.” The New York Times’ Michael Kimmelman describes it as a “vast neoliberal Zion.”
“New York politics and real estate are notoriously akin to Rashomon,” reads Kimmelman’s review. “Any verdict on an undertaking as costly and complex as Hudson Yards depends on one’s perspective.”
Views abound, sure, but so far, nobody seems to like what they see when they look at Hudson Yards. The project has managed to do something unique: unite all New Yorkers in a vernal equinox of acid contempt. Early reviews offer a litany of contrasts, with the development’s garish geometry and dull placelessness earning rebuke in equal measure. That’s before considering how certain features, particularly Thomas Heatherwick’s oft-derided shawarma-shaped bucket, square with other projects as “bellwethers pointing to exactly where our cities are going awry.”
However, among all the many reasons to feel salty about Hudson Yards, one perspective may deserve a place of privilege: the view from Harlem. Without their knowledge, the residents of a number of public housing developments helped to make Hudson Yards possible. The mega-luxury of this mini-Dubai was financed in part through a program that was supposed to help alleviate urban poverty. Hudson Yards ate Harlem’s lunch.
Specifically, the project raised at least $1.2 billion of its financing through a controversial investor visa program known as EB-5. This program enables immigrants to secure visas in exchange for real estate investments. Foreigners who pump between $500,000 and $1 million into U.S. real estate projects can purchase visas for their families, making it a favorite for wealthy families abroad, namely in China. EB-5 is supposed to be a way to jumpstart investment in remote rural areas, or distressed urban ones.
Hudson Yards, of course, is nobody’s idea of distressed. Located at the source of New York’s High Line, it’s the most expensive real-estate project in U.S. history. It could not possibly qualify as distressed under the terms of the program, or any understanding of the word. In order to buy EB-5 visas at the lower rate ($500,000), immigrant investors must put their money behind projects in areas with high unemployment—a proxy for need.
Manhattan’s West Side may not suffer for lack of opportunity, but, as Kimmelman notes, New York real estate is a realm for Kurosawa-esque visionaries. The Related Companies, the developer behind Hudson Yards, raked in at least $1.2 billion in EB-5 funds for this project. To qualify, Related needed a work-around to bypass the distressed-area requirements—a pass that New York authorities were happy to issue.
Here’s how these requirement works: EB-5 visa applicants must invest a minimum of $500,000 in a project within a designated geographic area called a targeted employment area, or TEA. To be eligible for this financing, a project needs to qualify as falling within a TEA—which is going to be either a rural area or a distressed urban area. For an urban area to count as a TEA, it has to meet a certain unemployment threshold (150 percent of national unemployment).
Lower Manhattan doesn’t meet this unemployment threshold, so Hudson Yards, on its own, can’t qualify as a distressed urban area. However, when Congress created the EB-5 visa as a part of immigration reform legislation in 1990, lawmakers did not specify how states should draw up the geographic boundaries for a TEA.
New York takes a rather liberal approach to drawing these lines. Empire State Development, the economic development agency for the New York state government, determines the boundaries for qualifying TEAs. Under state law, the agency has the authority to string together an unlimited number of census tracts in order to achieve the desired aggregate unemployment standard. Think of it as a form of creative financial gerrymandering.
As I reported back in 2017, records obtained by CityLab under the Freedom of Information Act reveal the gerrymandered map that Empire State used to qualify Hudson Yards for EB-5 financing. This particular TEA snakes up from the West Side and includes Central Park. (Think about that: a map of Manhattan that claims Central Park as an economically troubled area.) Beyond the park, the qualifying zone for Hudson Yards captures several census tracts in Harlem, where public housing projects boost the overall unemployment figure.
These funds might have financed alternative developments in Harlem directly. Other developers have successfully raised EB-5 funds for projects in actually distressed areas of New York. For example, Asian Americans for Equality, a nonprofit organization, once pursued EB-5 funding to finance a food hub and university project in northeast Kansas City, a grocery store destroyed by Hurricane Sandy in the Far Rockaways, and an affordable housing complex in Queens’ Flushing neighborhood.
Instead, Related sopped up hundreds of millions in funds never intended to finance luxury projects. The developer has successfully leveraged Harlem unemployment to raise more in EB-5 financing than any other developer in the nation. Related recently sought a third tranche of EB-5 funds for Hudson Yards, targeting $380 million—bringing the total as high as $1.6 billion, according to New York University’s Stern Center for Real Estate Finance Research.
Gerrymandering aside, certain aspects of this 28-acre development were deserving subjects for EB-5 financing, according to Gary Friedland, scholar-in-residence at the Stern Center, who has tracked the EB-5 program and its impact on real estate with NYU professor Jeanne Calderon.
“The first capital raise—for the platform that serves as the base for the buildings in the first phase of [Hudson Yards] over the eastern railyard—was an excellent use of EB-5 capital,” Friedland says in an email. “This funding of horizontal infrastructure at the beginning of a multiphase, long-term real-estate development project requires patient capital, since the project will not generate cash flow to support debt service payments on the mortgage until after the vertical buildings are completed and occupied. This type of capital is not readily available from many conventional sources.”
Friedland adds: “In contrast, the inexpensive EB-5 capital for the funding of the two buildings merely enhanced the returns of Related, as the capital would have been readily available from conventional sources.”
Financing under EB-5 is not unlimited. All in all, Related solicited investments from some 3,200 foreign visa-seekers. This figure is significant, since the number of new visas that the U.S. issues each year under EB-5 has a hard cap of 10,000. Given that each eligible investor may claim visas for immediate family members—and since these family visas (an average of three) also count toward the overall cap—the Hudson Yards development may have easily claimed an entire year’s worth of visas issued under EB-5.
The annual cap contributes to long lines for would-be immigrants: Investors from mainland China face waiting lists of up to 15 years, according to Friedland. The cap on visas also serves as a cap on available financing. If a project like Hudson Yards accounts for a whole year’s worth of EB-5 visas, it also consumes a year’s worth of financing meant for projects in low-opportunity places. “The use of EB-5 capital to fund mega-projects like [Hudson Yards] absorbs a significant portion of the limited annual quota of EB-5 visas,” Friedland says.
The EB-5 visa program has come under increasing scrutiny in recent years, owing to a number of fraudulent real-estate schemes financed via investor visa dollars. In one notorious episode, two Vermont financiers built a resort complex—water park and all—using EB-5 funds, including $200 million that they misappropriated. They were planning a rural biotechnology campus before the U.S. Securities and Exchange Commission brought the hammer down. The stink on this scheme rose so high that the federal agency that administers the investor visa program terminated the state’s EB-5 program.
The Trump administration has only added fuel to the fire. Family members of Jared Kushner have reportedly used his proximity to the White House as a way to promote Kushner Companies projects with EB-5 investors in China. Li Yang, the owner of the Florida spa where New England Patriots owner Robert Kraft allegedly solicited sex, reportedly charged Chinese executives for access to the Trump administration at Mar-a-Lago; her company also peddles EB-5 investor visas with a promise of access to elected officials.
But the party could be coming to an end. A late Obama administration regulation would ratchet up controls on the EB-5 program, in part by raising the two standard minimum investment levels (from $500,000 to $1.35 million, and from $1 million to $1.8 million) and making the U.S. Department of Homeland Security responsible for designating TEAs. Conservative critics of this so-called “midnight rule” have appealed to the Trump administration to scrap it and renew the program as is, warning that the rule as promulgated will destroy EB-5. A final version of the Obama-era rule could arrive as soon as this month.
Over the years, this cash-for-visas program has collected a curious collection of political friends and enemies. Despite the benefits it has showered on the Trumps and Kushners, Senate Minority Leader Chuck Schumer might be the biggest defender of the EB-5 status quo in Congress. Republican Senator Chuck Grassley, meanwhile, leads the push for reform.
Whatever fate awaits EB-5, the program now has a monument to itself, in the form of Hudson Yards. Critics might search for meaning in the development’s burnt-sienna beehive staircase or its severe scissoring towers, but the message that this new colossus sends to the world isn’t in the architecture alone. Hudson Yards is a beacon for New York, open to all who who can afford it.