Opportunity Zones: A potential boost or bust for inner-city economic development?

Ensuring the success of the 8,700 Opportunity Zones created in low-income, communities across the country will take “intentional, collective action from everyone involved,” according to the President’s Council on Impact Investing, a philanthropic leadership group that is part of the U.S. Impact Investing Alliance. Without a coordinated effort that includes policymakers, investors, fund managers and philanthropists, Council members are concerned the residents of the Opportunity Zones won’t have a voice, could be displaced if their neighborhoods become gentrified and “are at risk of losing out and falling further behind, while Zones in already-gentrifying parts of urban areas like New York City or Washington, D.C., continue to draw the lion's share of development capital,” according to a press release the group issued.

To ensure the success of the Opportunity Zones, the Council recommends the following steps be taken so that community members have a voice and are engaged in the redevelopment process:

• Local, state and national policymakers need to leverage the incentives and regulations to protect the priorities of the residents in the Opportunity Zones, which they can do  through effective policies, in tandem with civil society and impact investors;
• Utilize the Opportunity Zone Reporting Framework, which provides a model for fund managers to regularly and transparently engage with their communities;
• Investors and those who make grants should be champions for the communities they work with “and hold market actors accountable for the outcomes of their investments.”

The new economic development program was created through a provision in the Tax Cuts and Jobs Act of 2017 that allows governors to designate low-income areas in their state as Opportunity Zones. The tax law includes an incentive for private investment in: More affordable housing, small-business development and other economic-development drivers and job-creation programs in the designated zones. About 31 million Americans live in the Opportunity Zones, with almost one-third living in poverty. About half the residents are people of color and the unemployment rate in these areas is more than three times the national average.

According to a White House fact sheet, the Opportunity Zones “are expected to spur $100 billion in long-term private capital investment in economically distressed communities across the country.”