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Opportunity Zone Success: More Than Just Capital
The Opportunity Zone Program rests on the premise that billions in capital gains can be invested in designated zones to help spur economic growth. The win-win is that investors can defer taxes on those gains, while much-needed financial resources can be used to build up lower-income neighborhoods.
But Urban Institute’s Brett Theodos and Brady Meixell point out that the program’s success relies on more than ploughing money into a neglected neighborhood. In their report, “How Chicago and Cook County can Leverage Opportunity Zones for Community Benefit,” the authors point out that the program will only be as successful as the municipal and county governments wielding it. The local communities and governments need to ensure that the investment has a positive impact on residents at all income levels. In other words, the regions need to attract new capital, while ensuring that low- and moderate-income residents can afford to stay put, as their communities improve.
The authors also remind readers that “market forces will still guide investment decisions, particularly for investors deciding among multiple Opportunity Zones.” In other words, the O-Zones that already have a great deal of investment could be regarded as lower-risk and therefore, more appealing to investors. The end result could be an increase in gentrification, and community member displacement.
Theodos and Meixell note that simply designating Opportunity Zones is only the beginning for this program. Local officials, along with impact investors and philanthropists need to consider the types of neighborhoods that are within those zones, and explore the appropriate strategies that can serve each of those neighborhoods. To that end, they made the following suggestions:
- Leverage community planning and bring stakeholders to the table
- Match strategies according to neighborhood types
- Provide public and philanthropic resources
- Include transparency and monitoring
In using Chicago and Cook County as examples, Theodos and Meixell conclude that the region “could be ideally positioned to attract new investment,” as it fits into the lower-income parameters, while boasting “strong philanthropic and civic cultures.” However, to ensure that the Opportunity Zone program is effective, the authors indicate that the proper incentives and reporting be put into place, to ensure that any new capital influx can meet community goals and benefit all residents.
For comments, questions or concerns, please contact Amy Sorter
- ◦Financing
- ◦Development
