STRATEGY
OPPORTUNITY ZONES
Will Opportunity Zones Boost America’s Distressed Neighborhoods?
“opportunity zones” have been created — areas where need and tax breaks are bringing in billions in new investment. More remarkably, such sums have been raised even though opportunity zone regulations from the Treasury Department have not even been finalized. NEWTAX RULES Our story begins on page 355 of the Tax Cuts And Jobs Act, the 2017 legislation which updated the fed- eral tax code for the first time since 1986. Under tax reform, “a population census tract that is a low-income community” can be designated as a qualified opportu- nity zone. In fact, as many as 25 percent of the census tracts in any state can be certified with this new and special status. It may seem odd that so many census tracts are down-and-out given low unemployment and rising average incomes. But, for many workers and in many areas, the economy has not delivered. The explanation, it turns out, is that with the shift from factories and smelters to electrons and job-sharing, many workers
have seen no real wage increases in decades. “Despite some ups and downs over the past several decades,” says the Pew Research Center, “today’s real average wage (that is, the wage after accounting for in- flation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers.” “The onrush of technology,” says the Central Intelli- gence Agency, “has been a driving factor in the gradual development of a ‘two-tier’ labor market in which those at the bottom lack the education and the professional/ technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits.” GAPS IN THEWORKPLACE HAVE LED TO GAPS IN OUR NEIGHBORHOODS. “The uneven recovery is leaving too many communi- ties behind,” reports the Economic Innovation Group. Its research shows that “50 million Americans live in economically distressed communities —places strug-
by ATTOM Data Solutions
V
erizon has just named the 50 best small cities to start a small business and it’s a great list. A lot of small communities are expanding their job base, but what’s happening in these leading towns with between 50,000 and 75,000 people is not true everywhere. We increasingly have a divided economy. At one end are world cities such as San Francisco, Los Angeles, San Jose, Seattle, Washington, New York and Boston as well as some small-but-successful towns such as
those named by Verizon. At the same time, we also have thousands of census tracts that haven’t kept up: neighborhoods where jobs are leaving, tax collections are down, and people are moving away. It is in these areas where newly minted opportunity zones — also known as “O-zones” or “OZ” — can hopefully spark development, create jobs, and yield investor profits. For many investors the next big financial happening is just about everywhere. Across the country some 8,700
52 | think realty magazine :: july / august 2019
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