June 18, 2020
FOR IMMEDIATE RELEASE
CONTACT
Carter Dougherty
carter@ourfinancialsecurity.org
(202) 251-6700
Opportunity Zones will worsen affordable housing crisis, displace Black and Brown residents
White House pushes expanded tax break that benefits big real estate and accelerates dislocation
WASHINGTON, DC — The Opportunity Zone tax break is likely to exacerbate the affordable housing crisis and displace residents of color and lower-income residents while rewarding rich real estate investors with a lucrative tax break, according to a new report by the Alliance of Californians for Community Empowerment Institute, Americans for Financial Reform Education Fund, Kansas City Tenants, and New York Communities for Change.
The full report can be downloaded here. An executive summary is here.
The tax break, signed into law by President Trump in 2017, is deeply flawed in design and implementation, and is only becoming worse as the Administration takes advantage of the COVID-19 crisis to relax rules still further. The administration issued a new guidance in early June that would make it even easier to get an Opportunity Zone tax break and would reduce requirements that investments actually flow into designated areas.
“Our communities — Black and brown neighborhoods, poor and working class people — have been pushed around, pushed out, exploited, and oppressed for too long due to racist land and housing policies that prioritize profits over people,” said Diane Charity, leader with Kansas City Tenants. “The Opportunity Zone tax break twists the knife by adding yet another way for private companies to extract from our neighborhoods, leaving us fewer and fewer affordable, decent places to live.”
Proponents promoted the Opportunity Zone tax break provision in the 2017 Tax Cuts and Jobs Act as a way to encourage investment in economically disadvantaged areas, but its poor design and flawed implementation mean that it is providing generous tax benefits for investments in already booming cities and gentrifying neighborhoods. The Treasury Department designated hundreds of more affluent census tracts as qualified Opportunity Zones and that most of the investment dollars are likely to go there. Nearly 9 percent met neither the income or poverty thresholds to meet the “low income” standard in the statute, according to the report.
“The majority of the investments are likely to flow to already gentrifying areas and hot real estate markets where the profit opportunities are the greatest, creating a huge tax break for real estate developments that were already underway, were likely to happen anyway, and may harm, not help existing community residents,” said Patrick Woodall, senior researcher at Americans for Financial Reform Education Fund. “There are no requirements in the program that investments actually help low- or middle-income community residents, and the Trump administration further watered down the tax rules to make such outcomes even less likely.”
The tax break — even without the recently proposed expansions — could become a $26 billion tax giveaway to giant real estate investors and private equity firms, according to the report. Many well-connected developers, including Trump allies, successfully lobbied to get pet projects covered by Opportunity Zones. High-profile projects have included yacht marinas, ski resorts, luxury condominiums, and hotels.
“The Opportunity Zone tax break is yet again another attempt to fill the pockets of Big Real Estate at the expense of poor and working class, communities of color,” said Amy Schur, campaign director, Alliance of Californians for Community Empowerment Institute. “When so many in our communities are already living on the edge of homelessness, policies like this are what pushes thousands more over the tipping point. We need community-based solutions to investment, not more of Wall Street playing monopoly on our lives.”
Prior tax incentives to promote development in economically disadvantaged areas raised housing costs, displacing residents of color and lower-income residents. The Opportunity Zone tax break is much more generous to real estate investors than these previous tax incentives, and real estate and housing prices have already risen dramatically in qualified Opportunity Zones. The Opportunity Funds raising money to exploit this tax break will only amplify the affordable housing crisis.
The Trump administration and congressional Republicans are using the pandemic-driven economic catastrophe to try and expand the Opportunity Zone tax break and further weaken tax regulations to expand the giveaways for real estate investors. Meanwhile, millions of families of color and lower-income families are facing dangerous housing insecurity.
“Opportunity zones are being used to push out Black and Latinx families that have lived in their communities for decades but are now being preyed on by vulture developers and Wall Street investors,” said Jonathan Westin, executive director of New York Communities for Change. “It is a government sponsored program to displace low-income families and bring in higher income gentrifiers,”
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