A deep-diving article in Next City plumbs the potential promise and perils of Opportunity Zones. Regulation and oversight of the tax incentive program are crucial to allaying displacement and making sure investments benefit under-resourced communities. LISC CEO Maurice A. Jones weighs in on the new wave of investors eager to get involved, noting that insuring transparency is key, so communities and their allies “really know what people are using this tool for and how they’re using it.”
The excerpt below is from:
Will This New Investor Tax-Incentive Policy Avoid Mistakes of the Past?
By Oscar Perry Abello, Next City
Historians have meticulously documented how government policies and racial discrimination combined to result in billions of dollars invested in the creation of white-only, middle-class suburbs across the United States, while systematically denying the same investment to black people and black communities. You can read about it most recently in Richard Rothstein’s “The Color of Law.”
The consequences of this history remain firmly entrenched, as evidenced by today’s racially-segregated metropolitan areas and astounding levels of racial-wealth inequality. With government backing to build their homes and cement what was, in most cases, the primary source of wealth, white homeowners left other groups in the dust. In Boston, according to a study funded by the Federal Reserve, white households have a median net worth of $247,500, compared with just $8 (not a typo) in median net worth for U.S.-born black households. In Los Angeles, another Federal Reserve-funded study found that white households in that city have 100 times the median net worth of black and Latino households.
The next big chapter of this history is probably being written as you’re reading this, thanks to the new federal policy known as “Opportunity Zones,” passed as part of the Tax Cuts and Jobs Act at the end of 2017. A broad array of affordable housing developers, community development lenders, venture capitalists, real estate investment platforms, local housing and economic development agencies, bankers, and others have already lined up to utilize the new policy. It’s intended to drive billions of dollars in private investment into communities of color and other low-income communities that previous policies have left behind. Whether the policy will actually benefit the current residents of those communities remains to be seen.
“If residents and intermediaries are able to organize effectively — and I don’t mean marching in the streets, but effective organizing in the sense of finding right tables to be at — to have sustained negotiations about the types of projects that are suitable, and developing the right criteria to ensure that the types of projects built or invested in benefit the local community first … If you’re able to do that, then you actually see benefits for everyone else as well,” says Christopher Brown, financial policy director at PolicyLink, a nonprofit research and advocacy organization that works in cities across the country. “The fear is that the status quo will persist, and we know how that will shake out.”
REGULATORY GUARD RAILS, OR THE LACK THEREOF
Even the name, “Opportunity Zones,” sounds straight out of a history in which phrases such as “urban renewal” eventually came to symbolize the exact opposite of what the words seem to mean. “[Urban renewal] means negro removal,” author James Baldwin once said, referring to the federal policy of encouraging cities to bulldoze entire neighborhoods at a time — neighborhoods often fully populated by black residents — to make way for highways, hospitals, large-scale public housing projects that later failed, or other public works. Opportunity Zones have a chance to avoid similar mistakes of the past, but the nature of the new policy leaves precious little time and not much legislative prerogative to put measures in place to avoid those mistakes.