Opportunity Zones Need to Work for Everyone
Opportunity Zones are delineated low-income areas where the government provides real estate investors tax breaks to build, a concept created in the Tax Cuts and Jobs Act of 2017. These incentives include deferment of “capital gains that are reinvested” in the area as well as permanent exclusion of “capital gains from the sale or exchange of an investment in a qualified opportunity fund held for more than 10 years.”
Real estate investors stand to make millions from these tax breaks when often these places, like the areas displayed in purple above, are simply the next step in the city’s development. More incentives to build in these places will only make gentrification happen faster. These incentives will put more pressure on banks to foreclose homes to make way for new investment and kick out long time homeowners. In their place, the Opportunity Zone’s current regulations offer no protections against the creation of businesses like casinos that serve as profitable investments but further regress communities.
Opportunity Zones have the potential to be as bad as the large scale urban renewal initiatives of the 1940s and 50s, or they can usher in a new era of equality. The outcome of Opportunity Zones depends on whether investors invest in both the physical spaces and the communities that live there.
This kind of dual-investment in people and places might take the form of land trusts so communities have a proactive say in what businesses are constructed. Land trusts make it far more likely that apartment complexes will include affordable housing options, businesses will promote job growth, and retailers will offer services to both new and existing community members.
Communities can also profit through crowd-sourced investment vehicles, an idea spear-headed by Cooperative Capital in Detroit. With community members directly invested in real estate, when housing prices rise due to the neighborhood’s increased value, this value will translate into returns for existing community members. Both land trusts and crowd-sourced investment models empower community members as partners, not needy beneficiaries.
Secondly, Opportunity Zones need to be explicitly constructed to help build a better future for the community. To this end there needs to be the addition of a regulation that companies who gain tax breaks need to hire 50% of their workforce from the Opportunity Zone, and do so at a wage that is benchmarked against the median income of the area. This kind of investment in training people will be necessary to provide the pathways for community members to rise with the influx of wealth, not be pushed out.
But not everyone can benefit from employer training, nor should everyone need to. There needs to be a place for barbers, construction workers, teachers, and chaplains to live in these Opportunity Zones even as land price increases. An incredibly audacious idea is to create a place-constrained basic income to support existing residents as their community changes. This income would come from an even disbursement of increases in real estate taxes as community wealth increases.
The current Opportunity Zone regulations only invest in physical spaces and not the people who inhabit them. Goals need to be aligned between newcomers and existing residents, and existing residents need to be empowered as decision makers in the changes that come to their communities. Opportunity Zones can create opportunity for all, but this outcome will require vigilance and a lot more work on the part of planners, legislators, and communities across the country.
