“…the federal government has left the future of neighborhoods up to developers and investors alone, and given them the opportunity to remake cities however they please, meaning however it is profitable. This vision does not typically involve affordable housing or businesses that serve low income customers...”
The Opportunity Zones introduced as part of President Donald Trump‘s 2017 tax cuts and, despite calling these cuts “an unconscionable handout to millionaires and billionaires,” embraced by Rhode Island Governor Gina Raimondo, were sold on the idea that they would “bring capital to the neighborhoods that most need it, but in reality allow wealthy investors to benefit from huge tax breaks while they speculate at the expense of the most vulnerable communities,” says a new report.
The report, Displacement Zones: How Opportunity Zones Turn Communities into Tax Shelters for the Rich was compiled by SAJE (Strategic Actions for a Just Economy), a South Los Angeles non-profit fighting for for economic justice and focusing on tenant rights, healthy housing, and equitable development.
Key Findings of the report include:
- Opportunity Zones were created by the rich, for the rich.
- Opportunity Zones were selected by criteria that ensures the most vulnerable communities are targeted.
- Opportunity Zones are designed to accelerate the type of speculative real estate investment that leads to displacement.
- Opportunity Zones will threaten terrible harm to low income communities and communities of color until repealed.
The report makes four recommendations for fighting against the destruction Opportunity Zones will bring to communities:
- Repeal the Opportunity Zones Program
- Use Local Government’s Land Use Powers to Implement an Anti-Displacement Overlay Zone and Regulate the Program
- Establish Community and Government Oversight at the Local Level
- Establish Community Controlled Funds for Equitable Development with Governmental and Philanthropic Partners
Opportunity Zones are the brainchild of the Economic Innovation Group (EIG), from a paper by American Enterprise Institute Director Kevin Hassett, now Trump’s Council of Economic Advisors Chair, and Center on Budget and Policy Priorities fellow Jared Bernstein. Turned into House Bill 828, and called the “Investing in Opportunity Act,” Opportunity Zones were never heard or debated and there were no public hearings. Instead, it was jammed into Trump’s 2017 tax reform package.
According to the SAJE report,
“The Opportunity Zones program is the most recent example of a long line of place based urban revitalization policies that use tax benefits to subsidize investment and hiring in ‘distressed’ communities. According to the California Legislative Analyst’s Office, similar programs like Enterprise Zones, Empowerment Zones, and the New Markets Tax Credit (NMTC), have failed to deliver any measurable increase in the well beings of targeted communities. Writing specifically about the NMTC program, the office notes that while the program was popular with investors and successful in steering investment the program uniformly failed to improve the incomes of residents of zip codes receiving the funding.“
As the report notes:
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“The program centers the neoliberal logic that private interests in the free market … decide how to best develop neighborhoods, and incentivise these investors to do so with tax breaks. By structuring the program as a tax break with no specificity as to how the investment may be directed… the government has given up any power to have a voice in how development should be done and has also undercut communities from having a say in what happens with the investment as well.
“In doing so, the federal government has left the future of neighborhoods up to developers and investors alone, and given them the opportunity to remake cities however they please, meaning however it is profitable. This vision does not typically involve affordable housing or businesses that serve low income customers.“
The report’s most important suggestion for combating the damaging effects of Opportunity Zones, other than repealing them, is to pass ordinances at the state and municipal level to “significantly regulate what is built and/or renovated in Opportunity Zones.” The report also recommends aligning state and local tax programs “to incentivize anti-displacement behaviors” by Opportunity Zone Funds.
For instance, the Berkeley, California City Council is looking at an “Opportunity Zone Displacement Mitigation Overlay” to “to protect local communities and advance community-serving investment objectives over those that primarily benefit profits of large developers and corporations.”
Such an overlay, passed locally, could include:
- Anti-demolition provisions
- Tenant protections against “renovictions”
- A contractual guaranteed right of return, affordable rents and tenant protections.
- Additional affordable units required
Also, communities should focus on:
- Keeping public land in the public’s hands.
- Community-land trusts and cooperative housing developments
- Inclusionary requirements for deeply affordable housing
- Local and targeted hiring requirements for developments
- Good job requirements for contractors working developments
Part of the report also details how some investors in Opportunity Zones may be looking for an easing of environmental regulations so that new and possibly dangerous companies can, for instance, emit or spill dangerous chemicals into nearby communities, as is currently the situation in South Providence, where at least a few of these Opportunity Zones have been established by Governor Raimondo. Enforcing laws already on the books and passing better environmental regulations to protect communities might prevent the worst behaviors from companies looking for big profits from displaced communities.
Governor Raimondo issued a statement after Trump’s Tax bill was passed two years ago. She called the Republican-Trump Tax Bill “an unconscionable handout to millionaires and billionaires paid for by working families from cities and towns like Cranston, Warwick, Providence and every other part of Rhode Island.”
Despite her words, Governor Raimondo has not only embraced these Opportunity Zones, she, with the help of the General Assembly, codified additional, state level tax breaks for millionaires and billionaires who want to take advantage of them. So as much as repealing Opportunity Zones at the national level may be an uphill battle, doing anything about them at the local level may be equally challenging.
Reading the full report is strongly encouraged: Displacement Zones: How Opportunity Zones Turn Communities into Tax Shelters for the Rich
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