Filling Critical Gaps, a Foundation Looks to Realize the Promise of Opportunity Zones
By Liz Longley
The Kresge Foundation works to create pathways to opportunities for low-income Americans, especially in urban areas, and it has a long track record of embracing new strategies, including impact investing, to give people a chance to join the financial mainstream. So when legislation within the 2017 Tax Cuts and Jobs Act showed the potential to help distressed communities make gains, Kresge got out in front of it.
That law is the Opportunity Act, which was designed to catalyze prosperity in places that have been bypassed by recent economic growth. The most important new program to address urban revitalization in decades, it provides private investors with significant tax incentives on unrealized capital gains in return for long-term investments in Opportunity Zones (OZs). Within just two years, the IRS—under the auspices of the U.S. Treasury—has certified nearly 9,000 zones in low-income, high poverty census tracts in all 50 states, putting them in the path of up to $6 trillion in capital.
That’s the promise. The catch is that the act came with few rules and resources to ensure that it works as intended. There are no set incentives for investing in, say, affordable housing over a luxury high-rise—raising the risk of gentrification. Transparency is nonexistent.
Photo courtesy of Yianni Mathioudakis.