The implementation of opportunity zones has ignited development possibilities, though it has left some questions, across the nation and in Houston.
The Opportunity Zone program, backed by the 2017 Tax Cuts and Jobs Act, is expected to inject millions of dollars into low-income neighborhoods through long-term investments. Houston has designated 150 areas throughout the region as opportunity zones, including parts of Downtown, Greenspoint and Sunnyside.
Leaders in two local management districts — the Greater East End and the International District — outlined the potential development options for opportunity zone funds in their areas. The common thread: adaptive reuse and redevelopment will reign.
A map that outlines the opportunity zones, tax increment reinvestment zones and management zones in Houston.
Demand For Downtown And Its Neighbors
This initiative is not free money, East End District Director of Economic Development and Infrastructure Patrick Ezzell said. To reap the tax benefits, the investment must be secure and sound with the potential to appreciate in value.
“The only advantage to this [initiative] is if the money you invest appreciates in value, so there is something to have a tax break from 10 years from now,” he said. “If you invest in something that loses money or doesn’t appreciate, there is no tax advantage at all.”
The Greater East End District warrants potential fund dollars because the area is rising in property value, Ezzell said.
Between 2010 and 2016, the median home value improved by 23% for the eight census tracts designated as opportunity zones within the district, according to U.S. census data.
Home values in census tract 3101, just east of Downtown and adjacent to hot neighborhood EaDo, skyrocketed from $151,100 to $267,500, a 77% increase during that period.
Map of the boundaries for the Greater East End Management District
Ezzell expects the primary focus of his district’s opportunity zone funds to be concentrated in areas closest to Downtown, which was also selected as an opportunity zone.
Other areas such as Midtown, a gentrifying area immediately south of Downtown, and Fifth Ward, a historic community bounded by Highway 59 and Interstate 10 northeast of downtown, will also be potential development targets.
However, popular areas such as EaDo (3102), a census tract of Downtown (2101) and the neighborhoods headed west on Westheimer Road were not designated opportunity zones.
“If you looked at that map of opportunity zones and drew a 2-mile radius around Downtown, all of those areas are going to see growth and be a primary area for someone to place some investment because they are likely to see good breaks in taxes during that minimum holding period, which is 10 years,” Ezzell said.
Within the East End district, the most likely and most profitable ways to utilize opportunity zone funds will be in the reinvestment of market-rate or tax credit multifamily projects or adaptive reuse development, he said.
The International Management District
A map of property types in the International Management District, 2009
Beyond The Bounds Of The Inner Loop
The International Management District, which has noted slower investment interest in the past, is one of the outer districts gearing up to take advantage of Opportunity Zone program funds.
Commonly known as Alief, the district is about 12 square miles bounded by Bellaire Boulevard to the north, Highway 6 to the west, Beltway 8 to the east and West Bellfort Road to the south.
The best option for developers and investors within the district will be redevelopment or reinvestment, International Management District Planner and Economic Development Specialist Tony Allender said.
The district has three census tracts that have been designated as opportunity zones. One is bounded by the Westpark Tollway to the north, Bellaire Boulevard to the south and Synott and Kirkwood roads to the west and east. The other two parallel census tracts are bordered by Beechnut Road to the north, Highway 59 to the south, Wilcrest Road to the east and Beltway 8 to the west.
While the area is heavily developed with residential and retail offerings, Allender said the area can accommodate large-scale office, warehouse or multifamily.
One redevelopment project that would be a good candidate for Opportunity Zone program funds could transform a traditional retail strip along Bellaire Boulevard into a denser mixed-use site, Allender said. The lifestyle center could feature ground-level retail and office and residential space on the upper levels.
A mixed-use environment would be a value-add project, which is a great avenue for opportunity zone funds to play in the district, Allender said. However, no developer or fund has outlined any specific plans for the area, according to Allender.
The other two census tracts are home to a warehouse, residential and office properties. Allender said funds can be used to make the district’s business park more competitive and attractive through modernization. The industrial-focused area has quick access to major thoroughfares such as Beltway 8 and Highway 59.
“It’s a probably a great place to use opportunity zone funds,” Allender said. “The purpose of opportunity zone funds is to inject a level of investment into something that is already going to be considered a good investment. It’s not a fund that is designed to take on risk.”
Originally Published on November 12, 2018 at 10:48PM
Article published originally via opportunity zones – Google News https://www.bisnow.com/houston/news/economic-development/opportunity-zones-94881