The 2017 Republican tax package created an Opportunity Zone program that provides tax breaks for real estate developers in specially designated, low-income neighborhoods. President Trump has touted the program as a key part of his effort to combat racial inequality, but a new study from the Urban Institute says the program is falling well short of its goals.
“The incentives were intended to foster equitable development outcomes — such as by creating quality jobs, affordable housing, community-oriented amenities like grocery stores, and improved quality of life for low-income people,” the report says. “Our evidence suggests they need to be redesigned so government dollars are allocated effectively and help project sponsors achieve those outcomes.”
The main problem, the researchers found, is that low-income neighborhoods provide relatively modest returns on investment. Wealthy investors prefer the higher returns they can get on projects in neighborhoods closer to developed areas. “Luxury housing in appreciating neighborhoods therefore may receive much larger public support than, say, affordable housing projects,” the report says.