Miguel Diaz de la Portilla, left, and Ronald R. Fieldstone, right, of Saul Ewing Arnstein & Lehr.

The Opportunity Zone program is receiving major attention in the real estate industry. Real estate developers and investors are expected to deploy a substantial amount of capital in Opportunity Zones. They are located in economically distressed communities where new investments, under certain conditions, can qualify for tax breaks. The Treasury Department designated nearly 9,000 census tracts as Opportunity Zones across urban and rural areas throughout the United States. It is estimated that approximately 35 million Americans live in Opportunity Zones, which have higher poverty and unemployment rates than the rest of the nation.

Some of Miami’s Opportunity Zones (OZs) are in downtown Miami, Wynwood, Hialeah and North Miami. While developers stand to reap the benefits of tax breaks it is not clear how residents of low-income neighborhoods in Opportunity Zones will benefit from the redevelopment of their communities. The current legislation and the proposed regulations do not impose any requirements on generating social or public benefits for those who live in OZs; rather, the standards are based upon purely economic formulas. We believe that it would be appropriate to have some degree of governmental involvement/regulation in the process to ensure that the development of OZs provides public benefits for the economically disadvantaged residents in Opportunity Zone areas since, by definition, OZs are based upon both a lower-income standard or poverty standard.

Our local government and community stakeholders can play a proactive role in making the tax program advantageous to the Miami’s low-income residents who deserve their fair share of the benefits from this federal program. For examples, elected officials can incentivize OZ developers or public companies to:

  • Provide job training, job availability and hiring preferences to current residents living in Opportunity Zones.
  • Create affordable and workforce housing to avoid the displacement of the residents and gentrification of historic communities.
  • Increase the services available for the lower income population including transportation improvements, health care improvements, healthy food options and educational services.
  • Engage residents and community organizations in the process as well as local elected and appointed officials.
  • Take advantage of community redevelopment agency grants and programs, such as those that exist in various areas in the city of Miami such as the Overtown CRA, the Omni CRA and the Southwest CRA where grants are provided to assist residents in the area to acquire residential units. Therefore, residents who could otherwise not afford to acquire or rent upgraded, or new units will now afford to do so based upon the grants and incentives provided.
  • Monitor the ultimate results of development in Opportunity Zone areas to see what social issues are being addressed or need to be addressed.

The one clear benefit of Opportunity Zone developments for both private industry and the government is that the property tax base will increase based upon the enhanced value being created by the OZ development. The increase in tax dollars should be redeployed back into local Opportunity Zones to benefit the residents who otherwise face the risk of being displaced by the new influx of OZ capital. It is important that our local government acts sooner rather than later before the OZ program shuts down low-income residents from the urban renewal that is expected to occur in neglected communities across Miami-Dade and beyond. We trust local government will use the Opportunity Zone program as a tool to help improve its constituents’ quality of life and prevent the displacement that often comes with gentrification.

 

Opportunity Zones are called “Opportunity Zones” because they are supposed to provide opportunities to the residents as well as the investors. Policy Link indicated that there will be substantial investment in Opportunity Zones and there is a need to connect people to growth and opportunities to ensure that all residents participate and thrive.

As a result of this concern, the following factors should be considered in improving neighborhood quality of life:

  • Good jobs. This includes job training and trying to improve the standard of living of residents in the area by having governments incentivize developers or public companies to provide job training, job availability and hiring preferences to current residents living in Opportunity Zones.
  • Creation of affordable and workforce housing to avoid the displacement of the residents and gentrification of historic communities.
  • Increase the services available for the lower-income population including transportation improvements, healthcare improvements, healthy food options and educational services.
  • Engaging local residents and community organizations in the process as well as local elected and appointed officials.
  • Taking advantage of community redevelopment agency grants and programs, such as those that exist in various areas in the city of Miami such as the Overtown CRA, the Omni CRA and the Southwest CRA where grants are provided to assist residents in the area to acquire residential units. Therefore, residents who could otherwise not afford to acquire or rent upgraded or new units will now afford to do so based upon the grants and incentives provided.
  • Assistance to try to monitor the ultimate results of development in Opportunity Zone areas to see what social issues are being addressed.
  • The one clear benefit of Opportunity Zone developments for both private industry and the government is that the property tax base will increase based upon the enhanced value being created by the Opportunity Zone development. Accordingly, not only will there be job generation for the construction of buildings and the servicing of those buildings or new businesses created, but the increase in tax dollars that should be redeployed back into local Opportunity Zones to benefit those residents who are otherwise affected by the potential displacement.
  • Another key factor in Opportunity Zone development is the analysis of institutional lending for multi-family, single family, commercial buildings and small business institutions in Opportunity Zone areas as well.

In conclusion, we think it would be advantageous for us to meet with the appropriate government officials and community stakeholders to further discuss the status of what is being  developed in Opportunity Zones and how to integrate the government in the process to benefit not only the economy in general, but those residents who live in Opportunity Zones who otherwise need to obtain their fair share of the benefits from the overall process.

Ronald R. Fieldstone is a partner in the Miami office of Saul Ewing Arnstein & Lehr. He focuses his practice on real estate, corporate/securities and taxation law.

Miguel Diaz de la Portilla is a partner in the Miami office of the firm. He concentrates his practice in the areas of land use and zoning, code enforcement, government procurement and administrative law.