The Ethical Debate Around Residency by Investment

Residency by investment—often called “golden visas”—sits at the uncomfortable intersection of global mobility, national interest, and inequality. It offers wealthy applicants a legal path to live in a country in exchange for making an economic contribution. Is that an efficient way to attract capital and talent, or a shortcut that lets money jump the queue? I’ve advised policy teams and investors on these programs over the past decade, and the debates don’t get simpler with experience. They do, however, get clearer once you separate what can work from what too often goes wrong.

What Residency by Investment Actually Is

Residency by investment (RBI) grants a residence permit—usually temporary at first, sometimes convertible to permanent residency—to a foreign national who meets specific investment criteria. This can range from buying government bonds or regulated funds to creating jobs, funding research, or supporting cultural heritage. It is distinct from citizenship by investment (CBI), which offers a passport, not just a residency card. That distinction matters ethically and politically: voting rights, national identity, and EU access are more charged when citizenship is granted outright.

Typical investment routes:

Capital investment in government bonds or approved funds

Direct job creation or business formation

Real estate purchases or development (increasingly restricted)

Donations to public interest projects (education, culture, R&D)

Over the past decade, more than 20 European countries have run some form of investor residence scheme. The European Commission’s 2019 report flagged systemic risks, especially in due diligence and transparency, but didn’t call for an outright ban. By contrast, EU pressure led to the closure of several CBI schemes, and countries such as Cyprus ended citizenship programs after scandal. The line between RBI and CBI is where much of the ethical heat sits.

Why Countries Consider RBI Programs

Governments don’t create golden visas to reward wealth; they do it to solve practical problems. The strongest arguments in favor fall into five buckets.

1) Capital for Public Priorities

RBI can channel private money into areas underfunded by governments. Portugal’s program, launched in 2012, has driven more than €7 billion in investment over the years, a lifeline during fiscal stress. In the U.S., the EB-5 program—capped at around 10,000 visas including family members—has mobilized tens of billions of dollars over a decade for infrastructure, hospitality, and manufacturing. When structured well, these programs blend the speed of private finance with public oversight.

2) Job Creation and Regional Development

The economic case strengthens when capital lands in sectors that create durable jobs. Job-linked RBI routes (like EB-5’s requirement to create 10 jobs per investor) force capital into the real economy. Regional set-asides also matter. When investment is steered to less wealthy areas rather than city centers, it can help rebalance growth.

3) Demographic and Talent Needs

Aging populations in Europe and East Asia force difficult math: who will pay for pensions and deliver public services? RBI can attract entrepreneurially-minded residents or founders who bring networks, not just cash. While most RBI applicants are investors rather than employees, many programs are blending investor criteria with startup and innovation tracks to target human capital.

4) Fiscal Gains with Limited Social Spending

Compared with family reunification or humanitarian migration, RBI tends to bring net taxpayers who initially use fewer social services. For finance ministries under pressure, that’s tempting. The caveat: if these residents become permanent or citizens, long-term fiscal dynamics revert to the mean. Short-run surpluses aren’t an excuse for poor design.

5) Diversification of Global Mobility

Wealthy individuals hedge political risk and plan for family education and healthcare. That’s a real driver: Henley & Partners’ 2024 forecast estimated a record ~128,000 high-net-worth individuals would relocate that year, with the UAE, Australia, the U.S., Singapore, and Canada among top destinations. RBI meets demand that’s already there, and countries can shape where that demand flows.

The Ethical Concerns You Can’t Wave Away

The case against RBI is serious and not just rhetorical. It isn’t “anti-wealth” to ask whether selling access undermines fairness, fuels speculation, or opens back doors for dirty money. The main critiques:

1) Fairness and Queue-Jumping

RBI creates a legal fast lane based on wealth. Migrants who contribute through work, study, or family connections wait years; a millionaire can sometimes qualify in months. Defenders argue that investors bring immediate benefits and face rigorous checks. Critics counter that public values—merit, commitment, and community ties—aren’t fungible with cash.

My take: fairness improves when RBI requirements are linked to outcomes people care about—jobs, R&D, affordable housing—rather than passive or speculative assets.

2) Housing and Local Displacement

Real estate routes have done real damage when combined with tourism booms and constrained supply. Portugal’s property-focused years coincided with double-digit price growth in Lisbon and Porto, driven by multiple factors: short-term rentals, urban renewal, and global capital. Golden visas were one piece of that puzzle. Spain moved to end the real estate route, and Portugal eliminated it in 2023. When RBI stokes demand without adding supply, locals pay.

3) Money Laundering and Security Risks

FATF and the European Commission have warned that investor residence and citizenship schemes can be exploited for money laundering, sanctions evasion, or influence operations if due diligence is weak. The UK closed its Tier 1 Investor Visa in 2022 citing national security concerns. RBCs need source-of-funds verification, ongoing monitoring, and cooperation with international enforcement. Without that, you’re renting your flag to whoever can afford it.

4) Trust and Democratic Legitimacy

Citizens tolerate inequalities when they see a social contract at work. RBI can feel like an auction for rights that others earned through shared obligations. That perception—fair or not—erodes trust in immigration policy as a whole. Transparency helps, but so does ensuring visible benefits, like affordable housing funds, scholarships, and local infrastructure.

5) Externalities on Origin Countries

When an investor moves assets and eventually tax residency, origin countries can lose capital and civic engagement. RBI doesn’t cause fleeing in unstable states, but it can accelerate wealth flight. Coordination and tax information exchange (CRS) reduce the risk of tax evasion, yet they don’t fully address the brain-and-capital drain for developing economies.

What Real Programs Have Taught Us

The nuance comes alive in case studies. A few that illustrate lessons—good and bad.

Portugal: Course Correction in Real Time

What worked: A fast, administratively simple program initially attracted capital during crisis years. Cultural and research donation routes funded public goods that taxpayers noticed. More recently, an investment-fund option has shifted capital from apartments to productive sectors, with regulated funds under the CMVM.

What didn’t: Heavily property-led investment amplified housing pressures, particularly in Lisbon. The response—ending real estate eligibility and targeting funds, job creation, and cultural support—shows an ethical pivot motivated by lived impacts rather than ideology.

United States EB-5: Strong Potential, Fraught Execution

What worked: Job creation as the core metric pushes investment into the real economy. EB-5 has financed hospitals, factories, and infrastructure that wouldn’t otherwise get built as quickly.

What didn’t: For years, geographic gerrymandering let projects in Manhattan qualify as “targeted employment areas” meant for disadvantaged regions. Fraud scandals (e.g., the Jay Peak case) exposed supervision gaps. The 2022 Reform and Integrity Act tightened audits, fund administration, and set-asides for rural and high-unemployment areas—a template for others.

Greece and Spain: Housing First, Then Rethink

Greece drew a surge of property investors with a low threshold; after price pressures, it raised minimums in high-demand areas and added guardrails. Spain moved to end the real-estate route amid housing concerns. Both underline a simple rule: don’t tether residency rights to housing scarcity.

Cyprus and Malta (CBI context): A Hard Stop

Cyprus’ citizenship program ended after investigative reporting revealed abuses. Malta’s “exceptional services” route remains controversial despite added residency prerequisites and vetting. These examples, while citizenship-focused, shaped public sentiment around RBI as well. Design details either build legitimacy or destroy it.

A Practical Framework for Ethical Design

If you’re a policymaker, here’s the step-by-step process I recommend when an RBI proposal lands on your desk.

Step 1: Start With the Public Objective, Not the Investor Pitch

Decide what you’re trying to solve: regional employment, lab-to-market R&D, hospital renovations, climate resilience, rural depopulation. Spell out success metrics in public terms: jobs per euro, units of affordable housing delivered, megawatts of green energy deployed.

Step 2: Choose Instruments That Match the Objective

Job creation: Require direct or indirect job creation verified by independent economists using transparent multipliers.

Regional development: Use regional set-asides and tie eligibility to projects physically located in designated areas.

Innovation: Channel capital into regulated venture funds with safeguards, or into public-private research partnerships with governance rights for the state.

Housing: Prohibit purchases of existing residential property; allow investments only in projects that add net housing supply or fund affordable units.

Step 3: Price for Scarcity and Externalities

Set minimum investments based on economic analysis, not peer-country averages. Include:

A housing impact fee in cities with supply shortages

Higher minimums in overheated markets

Discounts for projects with superior social value (rural hospitals, grid upgrades)

Consider auctions or dynamic pricing caps to reveal demand and prevent underpricing.

Step 4: Cap Volumes and Concentration

Quota the number of approvals per year and enforce geographic diversification. If 80% of applications target two neighborhoods, raise thresholds there or temporarily pause approvals. Scarcity preserves quality and public acceptance.

Step 5: Build a Two-Layer Vetting System

Government layer: Background checks via national security, tax authorities, police, and financial intelligence units.

Independent layer: Third-party due diligence firms with global reach reviewing source-of-wealth, politically exposed person status, and litigation history.

Require enhanced due diligence for high-risk jurisdictions and sectors. Denials should be non-appealable on national security grounds, with privacy-protecting public reporting on aggregate reasons.

Step 6: Demand Ongoing Compliance

RBI should be a path, not a moment. Require:

Annual reporting of investment status and job maintenance

Random audits and site visits for project-based routes

Renewal requirements tied to continued compliance

Revocation clauses for misrepresentation or noncompliance, with clawbacks for promoters who enabled it

Step 7: Insulate Oversight from Capture

Create an independent oversight body with:

Whistleblower channels

Mandatory publication of statistics (approvals, denials, sectors, regions)

Conflict-of-interest rules for officials

Budget independence and the authority to suspend routes

Step 8: Communicate Benefits Locally

Earmark a visible share of fees and tax receipts for community benefits—parks, clinics, apprenticeships—where projects happen. Publish dashboards showing how each cohort’s capital translated into outcomes. Legitimacy is built in neighborhoods, not press releases.

Step 9: Set a Sunset Clause and Evaluation Cycle

Time-limit the program (e.g., five years) and require a formal, independent evaluation before renewal. If the data says it’s not delivering net value, let it die.

How Investors Can Participate Responsibly

Ethical RBI isn’t only the government’s job. If you’re an applicant or advisor, you influence where capital lands and what kind of industry practices survive. A practical checklist:

Step 1: Clarify Your Real Objective

Is the goal mobility for your family, business expansion, education, or eventual citizenship? Objectives determine the right route. If you never intend to live in the country, avoid real estate speculation that harms locals; consider regulated fund options or job-creating ventures with transparent oversight.

Step 2: Vet the Program’s Integrity Signals

Look for:

Public statistics and annual reports

Independent audits or oversight bodies

Clear revocation and compliance rules

Restrictions on real estate in tight markets

Alignment with FATF and OECD guidance

Programs that hide data or overpromise timelines should raise alarms.

Step 3: Do Deep Source-of-Funds Preparation

Expect to document 10+ years of wealth accumulation with bank statements, tax returns, sale contracts, and corporate records. High-quality programs demand this. If an agent says “we can handle it” without documentation, walk away.

Step 4: Choose Regulated, Transparent Investments

Funds: Prefer vehicles regulated by a credible authority, with audited financials, third-party fund administrators, and clear exit horizons.

Direct projects: Require escrow and milestone-based releases, performance bonds, and developer track records.

Donations: If permitted, ensure the beneficiary is a real public-interest entity with published financials and governance.

Step 5: Understand Tax and Residency Interactions

A residence permit doesn’t automatically change your tax residency—but living in a country typically will. Consult tax professionals on:

Days-in-country thresholds

Controlled foreign corporation rules

Exit taxes in origin countries

CRS reporting and how your financial information will be shared

Tax surprises are the most common—and avoidable—pain point I see.

Step 6: Plan for Integration

If you intend to spend time in your new country, invest in language courses, community participation, and local business links. Ethical participation isn’t just about compliant capital; it’s about real presence and contribution.

Common Mistakes That Sink Programs (and Applicants)

Governments racing to the bottom on price: Low thresholds invite rent-seeking and weak projects. Price for quality and scarcity.

Treating real estate like a default: When in doubt, shy away from property purchases, especially in constrained markets. Use build-to-rent or affordable housing bonds instead of trophy apartments.

Lax promoter oversight: Unregulated agents promise timelines they don’t control and returns they can’t deliver. Require licensing and penalize misrepresentation.

No exit strategy: Investors get stuck in illiquid projects. Policymakers should require clear exit windows; investors should read the fine print and assume delays.

Ignoring public sentiment: If locals see only higher rents and no community benefits, expect backlash and program closure.

Overpromising citizenship: RBI is not a golden passport. Tie messaging to residency rights and possible permanent residency on merit and time-in-country, not guaranteed nationality.

For applicants:

Underestimating due diligence: Source-of-funds mistakes, incomplete documentation, or ignoring politically exposed person rules derail cases.

Poor tax planning: Achieving residence while inadvertently triggering tax residency in multiple jurisdictions can be expensive.

Following herd investments: If everyone is piling into the same city or sector, risk-adjusted returns are likely worse and political risk higher.

Measuring What Matters

You can’t claim ethical outcomes without transparent metrics. A minimum viable dashboard:

Capital allocation: Share of investment by sector and region

Jobs: Direct and indirect jobs created, independently verified

Housing outcomes: Net housing units added, affordability metrics in affected areas

Public goods: Funds delivered to education, healthcare, or climate resilience

Denial and revocation rates: Reasons categorized (AML flags, documentation failure)

Processing times: Average and 90th percentile to spot bottlenecks

Concentration risk: Top-5 projects’ share of total capital

Community perception: Annual surveys in high-impact areas

Publish quarterly. External scrutiny raises standards and public trust.

Addressing the Core Ethical Questions

Is RBI a sale of rights?

Residency is not citizenship. It confers limited rights: to live, study, perhaps work; not necessarily to vote. That distinction doesn’t absolve the fairness critique, but it changes the stakes. When residency is tied to verifiable public benefit and to the same laws and obligations any resident faces (including taxes if present), it looks less like a sale and more like a contract.

Does it worsen inequality?

RBI privileges wealth; no way around that. The policy question is whether it exacerbates or mitigates inequality within the host country. When proceeds fund housing, education, or regional jobs, the net effect can be progressive even if entry is selective. When it fuels speculation and private gains for intermediaries, it worsens inequality. Design determines direction.

Can due diligence ever be strong enough?

Not perfectly. But multi-layered vetting, ongoing monitoring, and international cooperation can reduce risk to levels similar to other financial channels. EB-5’s reforms, EU AML directives, and widespread CRS tax reporting are meaningful improvements. Programs should assume some residual risk and compensate with tight scope and rapid response triggers.

What about the moral obligation to refugees?

RBI should not crowd out humanitarian programs. Set separate policy tracks and budgets. Some countries earmark a fixed share of RBI revenues to refugee resettlement or legal aid—a powerful way to show that mobility rights aren’t a zero-sum game.

Alternatives That Take Heat Off RBI

Policymakers sometimes reach for RBI because it’s visible and quick. There are quieter options that achieve similar goals with fewer ethical headaches.

Startup and talent visas: Lower barriers for founders, researchers, and skilled workers; tie renewals to traction, not capital size alone.

Remote worker visas with tax clarity: Attract mid-income earners who spend locally without competing for housing in saturated cores.

Thematic bonds: Issue green, housing, or education bonds to global investors; no residency attached, with transparent use-of-proceeds and impact reporting.

Diaspora investment vehicles: Mobilize citizens abroad with preferential terms; emotional ties can drive patient capital.

These options don’t replace RBI for every objective, but they expand the menu beyond “cash for cards.”

A Realistic Playbook for Governments

Distilling lessons into a short list you can put on a cabinet memo:

Set a clear public-purpose target: jobs, housing, or innovation—pick one or two, not ten.

Prohibit routes that worsen known bottlenecks: no purchases of existing residential units where vacancy is low.

Use regulated intermediaries: licensed funds, audited projects, escrowed capital.

Price to reflect scarcity: minimums high enough to deter low-quality applicants.

Cap and distribute: quotas per year and per region; pause the program if concentration spikes.

Enforce hard: double-layered due diligence, revocation mechanisms, penalties for promoters.

Publish everything that doesn’t compromise security: approvals, denials, sectors, regions, outcomes.

Reinvest visibly: spend part of the proceeds in ways communities can see and feel.

Sunset and evaluate: automatic review with independent analysis; renew only if the data justifies it.

A Realistic Playbook for Investors

Choose jurisdictions where policy is stable and transparent—even if the minimum is higher.

Work with regulated advisors, not unlicensed “fixers.”

Prioritize investments that create measurable public benefits; those programs survive.

Prepare exhaustive documentation early; assume enhanced due diligence.

Get tax and legal advice in both origin and destination countries.

Consider your social footprint: learn the language, show up in the community, hire locally.

Where the Trendline Is Heading

You can expect a tighter, more disciplined RBI sector over the next few years:

Real estate routes will keep shrinking in high-demand cities; fund- and project-based routes will dominate.

Due diligence standards will align with global AML norms; ongoing monitoring will be the norm, not the exception.

The EU will continue pressuring for harmonization and transparency, especially around Schengen access.

Competition will move from “cheapest threshold” to “clearest public value,” with programs competing on oversight quality and outcomes.

Investors will gravitate toward jurisdictions that treat them as long-term partners rather than fee payers—places where residency is a step toward real integration, not a laminated card in a drawer.

Final Thoughts

RBI isn’t inherently noble or nefarious. It’s a tool. In weak hands, it becomes a shortcut that commodifies rights, inflates housing, and invites bad actors. In careful hands, it directs capital to neglected priorities and welcomes globally connected residents who add more than they take.

I’ve seen both versions up close. The difference lies in the discipline of design and the honesty of purpose. If governments start with public goals and build guardrails accordingly—and if investors choose programs that match real contributions with real oversight—the ethical debate softens, and a workable middle ground emerges. That middle ground isn’t flashy. It’s accountable, transparent, and occasionally unpopular with promoters. But it respects the people already on the ground while making room for newcomers who are ready to put skin in the game. That’s the kind of migration policy a confident society can stand behind.