Success of Opportunity Zones Depends on Investors Making Long-Term Commitment to Urban Areas
A May 7, 2018, Jersey Journal article, “Opportunity Zones Could Spur Urban Revitalization” makes the case that the Opportunity Zone federal tax reform legislation championed by U.S. Senator Cory Booker (D-NJ) provide a new opportunity for New Jersey.
New Jersey already has 169 Opportunity Zones designated by Governor Phil Murphy. The Opportunity Zones are located in 75 municipalities spread over each of New Jersey’s 21 counties. The Opportunity Zones include parts of almost all of New Jersey’s major cities.
New Jersey faces an affordable housing crisis and Opportunity Zones are targeted to some of the areas that most need relief.
Joan Quigley, a former Assemblywoman from Jersey City wrote the article about the Opportunity Zones in the Jersey Journal. Quigley now serves as the President and CEO of North Hudson Community Action Corp.
“New Jersey Future, an organization promoting smart growth and affordable housing, analyzed the 169 prospects. They found population was growing slightly in those zones but rent increases were not occurring as fast as elsewhere. Good thing, because they also found median family incomes were not keeping up with the community and in half the cases had actually decreased.”
“However, the success of Opportunity Zones will depend on the willingness of deep-pocket investors to commit to those areas for the long term. They’ll do that only if they see a good opportunity to make money over the long term. Economic development folks, urban planners, and Chambers of Commerce will be scrambling during the next few months to make long-neglected neighborhoods attractive to investors.”
The Opportunity Zone Program provides an opportunity for mainstream private investors to support businesses and distressed communities.
The expectation is that Opportunity Funds, the new class of investment vehicles authorized to aggregate and deploy private investment into an Opportunity Zone, will ease the execution of “impact investments” for investors. It is expected that tax benefits derived from these investments will increase participation in the Opportunity Zones Program.
Originally introduced in the Investing in Opportunity Act (IIOA), the Opportunity Zones Program was enacted as part of the 2017 tax reform package (Tax Cuts and Jobs Act). The program is designed to drive long-term capital to rural and low-income urban communities throughout the nation and uses tax incentives to encourage private investment in impact funds.
In 2015, the Economic Innovation Group (EIG) – a bipartisan public policy firm – developed the Opportunity Zone concept, which was conceived as a systematic approach to helping address the uneven economic recovery and persistent lack of growth that have left too many American communities behind.