Gentrification on steroids: The Opportunity Zone program


Making money and dodging taxes is the American way:

Developers have a new reason to build in already-booming Durham. A new federal incentive will encourage investors in certain parts of the city, including East Durham, west of Duke University and in Southwest Durham. But the “opportunity zones” could also lead to private investors tearing down existing houses to build big, new houses and getting tax breaks on their returns, Durham County Commissioner James Hill said Monday.

“This is why this has been called the Kushner bill,” he said, referring to Jared Kushner, President Donald Trump’s senior adviser and son-in-law.

Personal anecdote time, try not to yawn too much: Every year my town throws a "business social," wherein we invite dozens of movers and shakers to a hoity-toity gathering in the hopes of attracting investments. Last year, one of the speakers was a lady simply giddy with the prospect of Opportunity Zones. She's a banker, but in the investment division, and while I was waiting patiently to hear about how this might improve our town, she spent the entire time (much more than any other speaker) talking about dodging Capital Gains taxes. In short, the more the merrier. Meaning, the really high-dollar projects are preferred, and result in the best "return" on said investments. Not much room for affordable housing in that formula. Here's more from the people who really understand this:

In contrast to the new Opportunity Zones, the policy with the best proven record—Empowerment Zones—focused on people and local services not just capital investments. They encouraged hiring, subsidized upfront investment in capital and equipment, offered loan guarantees, regulatory waivers, a partial exclusion of capital gains, and large grants to local government authorities for local services and infrastructure. Researchers Matias Busso, Jesse Gregory, and Patrick Kline (2013) find that Empowerment Zones boosted local employment and wages. But the program was expensive and intensive, costing approximately $850 per resident. As a result, only 11 neighborhood zones were ever designated under the original design.

There is no evidence that the design of Opportunity Zones will be as effective as EZs or other redevelopment efforts, particularly when it comes to benefits to local residents. Moreover, the theoretical effect of the Zone tax subsidies on local residents is ambiguous. It’s a subsidy based on capital appreciation, not on employment or local services, and includes no provisions intended to retain local residents or promote inclusive housing.

In an optimistic scenario, the tax benefits might encourage purchasing and rehabilitating residential property or expanding local businesses. But the value of the tax subsidy is ultimately dependent on rising property values, rising rents, and higher business profitability. That means a state’s Opportunity Zones could also serve as a subsidy for displacing local residents in favor of higher-income professionals and the businesses that cater to them—a subsidy for gentrification. Indeed, the highest returns to investors, and thus the largest tax subsidies will flow to those investing in the fastest gentrifying areas.

It is glaringly obvious that the motives behind Opportunity Zones were solely geared towards profits and tax avoidance, and not the reduction of poverty or even the neutral "urban renewal" approach.

Not trying to "lean in" on the 2020 Democratic Presidential Primary just yet, but I stumbled across this video with several clips of Cory Booker promoting this program, and I'm not going to ignore it: