Diverse Projects and Shared Effort Characterize Opportunity Zone Initiatives
Opportunity Zones are a place-based strategy to spur needed revitalization in underinvested areas throughout the United States. Created under the Tax Cuts and Jobs Act of 2017, Opportunity Zones are designated census tracts where preferential tax treatment encourages public and private investment to create new jobs, increase economic growth, and spur new business formation. The program allows for a range of approaches, reflected in the diversity of strategies stakeholders have so far pursued. In May 2020, the White House Opportunity and Revitalization Council, formed to carry out the administration’s plan to encourage investment in economically distressed areas, released a report chronicling examples of best practices categorized by stakeholder type. As the report notes, every project is unique, each making use of the available federal, state, and local policies and programs best suited to its objectives.
Everyone Pulling Together
Stakeholders at every level can take action to help ensure that Opportunity Zones are attracting investments that benefit both investors and the local community. Local governments, for example, have intimate knowledge of their communities’ particular needs. Community roundtables and listening sessions during the planning process are one strategy that can help the voices of those most affected by revitalization programs be heard by planners and developers. The report finds that when state-level policies support local governments, investments in Opportunity Zones can be even more effective. State legislatures are positioned to calibrate policies that provide certainty to investors and enhance the competitive attractiveness of Qualified Opportunity Funds, the financial instruments that function as the vehicles for Opportunity Zone investment by giving investors the ability to defer and reduce their tax liability on eligible capital gains. Philanthropic entities have long supported public efforts toward community revitalization. The roles philanthropies often play as conveners, advocates, and funders position these organizations to help ensure that Opportunity Zone projects and investments are socially responsible and beneficial. Often at the forefront of exploring new strategies to deep-rooted social problems, philanthropies can encourage innovative uses of investment dollars. Finally, each of these stakeholders can seek out available federal resources as part of their redevelopment toolkit.
As a resource, the report offers readers the chance to learn about the various current and completed projects. It lists dozens of efforts already underway to bring investment to economically distressed areas and encourages readers to find creative inspiration from the examples. One of the report’s lessons is how the success of any single project may depend on the combined efforts of stakeholders across different levels of government and different sectors. For example, the city of Baltimore benefits from state government efforts, federal programs, and philanthropic organizations. The Abell Foundation awarded the Baltimore Development Corporation a $100,000 grant to expand capacity by creating a new position of Opportunity Zone Coordinator. The Opportunity Zone Coordinator helps connect potential investors with projects, bridging capital and community needs. In one project, a Qualified Opportunity Fund is converting a former brownfield site into a mixed-use project that includes a grocery store, offices, and retail space. This project also leveraged the federal New Markets Tax Credit program. In another project, Morgan State University, Maryland’s largest historically black university, will be a primary tenant in the redevelopment of a vacant shopping plaza, using its status as an anchor institution to help drive local revitalization. These efforts are further supported by state policy. Maryland established the Opportunity Zone Enhancement Program in 2019, authorizing financial assistance to certain businesses and revitalization projects, easing the approval process for some projects, and establishing new financing for housing.
With 8,764 Opportunity Zones nationwide, each with its own resources and challenges, coordinating effective public-private stakeholder interventions is important. One effort highlighted in the report is Catalyzing Investment in Opportunity Zones, a competitivse design sprint of The Opportunity Project administered at the Census Open Innovation Labs at the U.S. Census Bureau. The 2019 sprint challenged participants to “create digital tools and resources to connect investors with community leaders, entrepreneurs, and workers.” The sprint resulted in several notable projects, including a community survey designed to elicit community needs, a customizable map to help identify technology-sector opportunities in rural areas, and efforts to measure growth equity in Opportunity Zones.
The scores of cases described in the report show how communities, policymakers, and investors are finding creative solutions to identify and solve problems of underinvestment in American neighborhoods. As a partner in many of these undertakings, HUD is advancing longstanding goals of promoting self-sufficiency, ensuring safe housing, and promoting vibrant communities.