An article in ImpactAlpha describes early efforts by community development groups, like LISC, and foundations to manage Opportunity Zone funds in a way that will maximize benefits for underinvested communities and the people who live and work there. These strategies deal head-on with the stated goal of the new tax legislation: to spur economic development in places where opportunities for residents are currently few and far between.
LISC CEO Maurice A. Jones, who is quoted in the article, will be a featured speaker on an ImpactAlpha "Agents of Impact Call" discussing strategies for success, and the challenges of realizing the Investing in Opportunity Act.
The excerpt below is from:
Early movers are getting a jump on opportunity zones – and the future of community investing
By Dennis Price, ImpactAlpha
A tweak to the tax code has set off a race between rival approaches to investing in some of America’s poorest urban and rural neighborhoods.
ImpactAlpha has identified at least 10 impact fund managers that are racing to take advantage of the Investing in Opportunity Act, which allows investors to defer, and even reduce, taxes on capital gains rolled into 8,700 designated opportunity zones.
The early movers are seeking to shape the future of opportunity zone investing, and with it, the character of neighborhood and community development in the U.S. for at least the next decade.
The provision, included into last year’s tax-cut bill, already is jumpstarting cooperation and mobilizing capital for deployment in American cities and rural communities on a scale not seen in some time.
“The first funds to market will shape what comes next for opportunity zones,” Village Capital’s Ross Baird told ImpactAlpha. “The people who wrote and championed the bill intended it to create impact and wealth in distressed communities. We need the impact investment community to rally to create use cases and models the country can learn from.”
In contrast, a go-it-alone approach that chases low-risk, high-return investments could attract extractive businesses, create few jobs, drive rent increases and displace existing residents.
Champions of impact investing are working together to ensure that investment strategies align with community goals. The idea is to coordinate among community stakeholders, set social and environmental objectives and fund local businesses that create good jobs, raise wages and build wealth for local communities as well as investors.
Early movers have the potential to shape both market entrants to come as well as the final rules that will govern the program, set to come down soon from regulators. On Monday, the Kresge and Rockefeller foundations accepted final letters of inquiry from fund managers seeking a share of $25 million in grants and unfunded guarantees for opportunity funds “designed to benefit low-income people and communities.”
Tomorrow, the Beeck Center for Social Impact and Innovation at Georgetown University, along with the U.S. Impact Investing Alliance and the Federal Reserve Bank of New York will convene investors and community groups at the New York Fed to begin to develop a shared framework to guide opportunity zone investments.
“Opportunity zones are a fantastic opportunity to think about place-based investing with private capital in low-income communities,” says Lisa Green Hall, a senior fellow at the Beeck Center.
AOL founder Steve Case, who championed the tax provision, is building a team at his Revolutionventure capital firm to develop real estate in opportunity zones for use by tech startups in areas far from the coastal tech hubs. And Bridge Housing, the nonprofit affordable housing developer, is creating a $500 million opportunity zone fund to finance affordable housing in West Coast markets.
Among the other impact-oriented opportunity funds:
Louisville-based Access Ventures, together with the Local Initiatives Support Corp., a national community development financial institution, and Village Capital, are planning an investment vehicle of at least $100 million. The fund would invest in an asset-class mix small businesses, commercial rental space, and affordable housing in opportunity zones in three to five cities across the U.S.
Sign up to listen in on ImpactAlpha's Agents of Impact Call No. 3 to hear from Maurice A. Jones, Beeck Center’s Lisa Green Hall, Economic Innovation Group’s Steve Glickman and other early movers. The takeaways: Opportunity zone strategies for success and signs of danger.