Opportunity Zones: Local Decision-Makers Must Balance Community Interests with Economic Growth Opportunities
Opportunity Zones (OZ) have received considerable attention in the real estate world, and while much of the coverage has explained the scope and complexities of this program, this post assesses an alternate perspective on an important dialogue in OZ implementation. (For more information about Opportunity Zones see this primer: The Great and Powerful (Tax Benefits of) OZ).
Designated OZs are areas with relatively low per-capita income rates (relative to their state) or a poverty rate of at least 20 percent. Many designated OZs, particularly in larger metropolitan areas, are located in areas near downtown, which are ripe for investment or redevelopment even without federal incentives. For example, in Raleigh an opportunity zone is located adjacent to Fayetteville Street in the south end of the central business district, adjacent to new high-rise construction (including the LEED building from which I am writing right now). In Northern Virginia, OZs in Alexandria are located within a bike-share ride from Amazon HQ2. Lack of economic demand is not the issue here, but rather the OZ designation further ignites an already hot market. Frequently when this happens, the positive effects of investment can be counter-balanced by conversations about potential gentrification, displacement, and the economic distribution of this place-based investment.
OZs come in many shapes and forms, one of which is real estate development. When considering real estate development in an OZ, it is important to be mindful that competing interests will likely be inserted into the dialogue in the ever-political arena of land use and development. Many local governments acknowledge that OZ economic development needs to be balanced with other community goals and have instituted policies and new personnel to specifically guide this conversation. Washington DC has a Chief Opportunity Zone Officer, who among other duties will facilitate community involvement in reviewing OZ proposals. As many acknowledge the potential for OZ investment to initiate and accelerate gentrification and displacement, additional local policy measures are likely that will vary by jurisdiction. Womble Bond Dickinson attorneys and land planners are accustomed to challenging conversations within various disciplines of real estate, and are equipped to navigate the paths unique to each project for approval or conflict resolution.