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“Opportunity Zones” May Hold Most Opportunity for Gentrification

Advocates across the country worked tirelessly last November and December in a failed attempt to stop the Trump Administration’s tax cuts for the wealthy. As the dust settled after the fight, some advocates took comfort in the law’s creation of Opportunity Zones, low-income areas that offer tax breaks for investment.

At least, thought these advocates, here was something for our communities. But upon closer inspection, it becomes clear that much of the “opportunity” here is the opportunity for gentrification.

The Opportunity Zones are low-income census tracts chosen by local governments (more on that later) for this special status. They allow tax-free investments in real estate and businesses within the designated areas. According to the Brookings Institute, investors can avoid $7.50 in taxes for every $100 they invest. That’s a pretty big incentive.

Certainly our low-income communities are in need of investment. After decades of neglect from both the private and public sectors, Opportunity Zones sound like the solution that these communities deserve—a governmental program to pull in reluctant businesses and investors.

And there could be some good. Affordable housing projects will be eligible for these tax breaks, too, meaning that some low-income communities will see some benefit.

But the problem is that these investors have no stipulations that their investments be for the good of the people who already live there. A new luxury condo building would receive the same subsidy as an affordable development. New businesses could flourish with the subsidy coming their way, while long-time community institutions will be largely left out in the cold.

As Peter Moskowitz documents in his book How to Kill a City, a blanket subsidy for a low-income area almost always ends of benefiting newcomers at the expense of those who already live there. Private investment without stipulations for the public good naturally seeks the highest profit, and that almost always means a displacement of the lower-income community that already called the neighborhood home.

What’s more, only one in every four low-income census tracts can be chosen by local governments. There’s some evidence that local jurisdictions have been targeting census tracts where public-private deals are already in place, meaning that there will be additional government subsidy for private investment that was already going to happen anyway. That completely misses the ostensible point of the program, which is to incentivize new investment in underserved areas.

Hopefully Opportunity Zones can help more affordable housing move forward in vulnerable communities. But without more direction towards public benefit, this program could all too easily turn into another governmental subsidy for gentrification.

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