Nestled within the $1.5 trillion federal tax cut enacted in December lies a little-known prospect for struggling communities.
The newly established Opportunity Zones program seeks to steer investment capital into cities left out of economic recovery, and it has caught the attention of government officials and mayors across the country, including in the District.
The program provides tax incentives for investors to invest in communities experiencing low income and extreme poverty rates.
“As we continue building a safer, stronger D.C., the Opportunity Zones program is a new tool we can use to strengthen neighborhoods throughout our city,” said Mayor Muriel Bowser.
City officials and supporters of the program say it could promote economic vitality in underserved areas, create funding for workforce and affordable housing development and upgrade underutilized assets through capital improvements.
Local government officials must submit their selected tracts to the federal government by March 21, and as government officials across the country scramble to make their choices by the fast-approaching deadline, the Bowser administration is spearheading the District’s efforts.
Every state, including the District, can choose up to 25 percent of eligible census tracts as Opportunity Zones. In D.C., 97 census tracts meet the program’s eligibility requirements, and it can choose up to 25 census tracts to participate in the program.
Last week, the administration sought public input on Opportunity Zones, opening a web-based survey for city residents to weigh in on possible locations.
“We want our decision to be informed by residents and stakeholders so that we can use this tool as effectively as possible and catalyze the types of investments that will create more pathways to the middle class for Washingtonians,” Bowser said.
The city has identified 18 possible zones and will take public input on the remaining seven which are grouped into three categories: east of the river, retail corridors and creative industries and manufacturing.
The survey will close March 12.
Though many have rallied to support the program, including Ron Busby of U.S. Black Chambers and Napster creator and early Facebook investor Sean Parker, questions remain about how fairly the zones will be designated to eligible census tracts nationwide, and whether additional tax breaks to investors actually helps distressed residents or opens up the door for gentrification.
According to Governing magazine, half of the city’s qualified low-income neighborhoods have already gentrified in the past several years including the NoMa neighborhoods and the area surrounding the new D.C. United stadium at Buzzard Point.
“By designating those areas as opportunity zones, the D.C. government can wipe out the tax bill that would otherwise apply to sale of those developments,” said Brooking Institution’s Adam Looney. “The same is true for gentrifying hot spots like the Shaw, LeDroit Park, Truxton Circle, Mount Pleasant and Brookland neighborhoods.”
The subsidy based on capital appreciation includes no provisions to retain existing residents or to maintain or expand affordable housing, making it unclear whether the lowest-income residents will benefit from the program.
“The value of the tax subsidy is ultimately dependent on rising property values, rising rents, and higher business profitability,” Looney said. “That means a state’s Opportunity Zones could also serve as a subsidy for displacing local residents in favor of higher-income professionals and the businesses that cater to them — a subsidy for gentrification.”