They’re thinking about how to make it work for smaller cities, as well as what it will take for Opportunity Zone investment to benefit existing residents and small businesses located in these zones.
Investors are waiting in the wings to pull the trigger on billions of dollars, and when they finally do, there’s nothing in the law that says those investments must lead to businesses hiring existing residents of Opportunity Zones or produce housing that’s affordable to them. In theory, the Opportunity Zones legislation was intended to spread benefits far and wide.
There are also many Opportunity Zones in big coastal cities and a few landlocked major cities in the middle of the country, cities with the kind of real estate markets that promise Opportunity Zone investors better returns than in smaller markets, with or without benefits for targeted communities. Opportunity Zones resemble previous or existing federal and state programs, like enterprise and empowerment zones, or the New Markets Tax Credit Program.
Opportunity Zones most closely resemble the EB-5 Immigrant Investor program, which has been wildly misused to finance projects that aren’t located in or directly benefiting economically distressed areas as intended. There’s a huge incentive for Opportunity Zone investors to make investments that drive up property values – if investors hold onto Opportunity Zone investments for at least 10 years, any new capital gains from cashing out those investments is tax-free.