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Opportunity Zones: Tying Economic Development with Equitable Outcomes

Publication date: 
Wednesday, June 20, 2018

In 2017, the Tax Cuts and Jobs Act created Opportunity Zones, a new community investment program for rural and low-income urban communities. Opportunity Zones enable private investors with capital gains tax liabilities to receive competitive tax breaks for investing in these designated areas. Recently, the U.S. Department of the Treasury has approved designation areas for over 8,000 Opportunity Zones across the country. In preparation for these Opportunity Zones, SCG member Enterprise Community Partners published the Opportunity360 Measurement Report detailing where action is most needed and where established programs and policies have been most successful in any neighborhood in the county using five key opportunity outcomes:

  • Housing Stability
  • Education
  • Mobility
  • Economic Security
  • Health and Well-Being

 

Using the Enterprise mapping tool, users can compare a county’s status among other counties in relation to the five key opportunity outcomes. For example, Ventura County scored a value of 10 or the 10th percentile in relation to housing stability among counties in the nation.

 

 

Enterprise also created the Opportunity Zone Eligibility Tool to illustrate newly-designated Opportunity Zones across the country. The Eligibility tool is a state-mapping tool, which utilizes census-track data to determine eligibility and how eligible tracts relate to other federal programs and designations. The Eligibility tool also filters on the five key opportunity outcomes which state and local governments as well as philanthropic organizations can utilize to develop robust data-driven programs that can maximize the benefits of Opportunity Zones in their communities.

 

 

Opportunity Zone Eligibility Map: Ventura County

Fundamentally, the benefits of Opportunity Zones can be maximized by building strategies that both attract and manage the flow of dollars in designated areas. Some of these strategies include:

  • Have states certify Opportunity Funds created in their state.
  • Creates accountability and transparency
  • Create state- or city-run Opportunity Funds
  • Require investments to stay in the locality or state

 

State and local government can play a central role in ensuring accountability, working with organizations that have deep expertise in providing capital to distressed areas, and leveraging existing organizations that are already embedded and deeply invested in designated Opportunity Zones. While Opportunity Zones provide new avenues for economic development for underserved areas, philanthropic organizations can play a strong role in ensuring that economic development is also met with equitable policies.

Given this new community investment program, Enterprise recommended that state and local governments as well as philanthropic organizations think of policies and programs that:

  • Promote inclusive and equitable economic growth for existing residents and businesses
  • Expand access to opportunity
  • Implement protections that prevent displacement
  • Incent investments geared toward high social benefit

 

In addition, Enterprise provided a list of strategies that can help fight displacement as new investments flow through these designated areas:

  • Inclusionary zoning
  • Linkage fees
  • Local hiring requirements
  • Property tax relief
  • Preservation – specifically buying unregulated, rent stabilized (i.e. naturally occurring) affordable housing
  • Prevention –
    • Tenant protections: eviction prevention, rent controls and tenant first-right-of-refusal policies 
    • Rapid re-housing
    • Community land trusts; land banks
    • Housing trust funds
    • Homebuyer (down payment) assistance
    • Foreclosure mitigation

 

Opportunity Zones grant new ways for economically-struggling communities to be uplifted. However, these new opportunities also run the risk of intensifying already disparate conditions. Centering economic development programs within an equity framework will ensure that consequences such as gentrification and displacement do not occur.

 

Funding Issue Area & Geographic Regions
Type of resource 
Geographic Location