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Opening an Important Dialogue Around Opportunity Zones

19th Oct 2021

While the Opportunity Zones Initiative has had its share of critics, a recent event highlighted how much agreement there is on how the program can be improved.

On October 7, 2021, the Brookings Institute held an online event titled, “Only the rich can play: The story of Opportunity Zones,” where speakers from both sides of the OZ debate talked about the pros and cons of the initiative, what they see as its current weaknesses, and potential solutions. Among the participants was JTC’s Reid Thomas, who discussed how his experience working with OZ projects has impacted his view of the program.

“There are a lot of naysayers still about this program that argue it is just a program for the rich to get richer, and the poor don’t get any benefit,” said Thomas after the event. “At the end of the day, the future of the program should be decided based on the results it delivers.”

We’ve discussed before how many of the criticisms of Opportunity Zones are premature, as the data has shifted in the past few years and the most recent results are very promising. One of the biggest criticisms has always been that too much OZ investment money is going toward areas that don’t have the greatest need, but when compared with other similar government initiatives, OZ has been far more successful in this area despite being at such an early stage.

“The challenge is that the type of change this initiative is focused on making will take a generation to achieve,” added Thomas. “So we have to look for measurable indicators along the way that can tell us whether things are moving in the right direction.”

Those measurable indicators have thus far been encouraging. The US Department of Housing and Urban Development has estimated that Opportunity Zones “have already generated approximately half a million jobs, attracted $75 billion in capital investments, and are on track to reduce the poverty rate in Opportunity Zones by 11 percent, lifting 1,000,000 people out of poverty.”

That doesn’t mean the program is perfect. Many industry leaders agree that the initial language of the initiative was lacking in some key areas, and as time goes on, regulations can be refined to better serve the public and make sure Opportunity Zones are doing the good they were intended to do.

Now that we’ve seen the program in action, the requirements for what qualifies as an Opportunity Zone could be changed, which would potentially solve one of the biggest criticisms: that too much investment is going toward areas that don’t need it. The definition of an Opportunity Zone could be recalibrated to eliminate 10% of tracts and replace them with better-suited ones, and the tax incentive could be increased for more distressed areas (or lowered for areas that are less distressed), doing more to encourage investors to seek out projects in the areas that need it most. This recalibration could even be done on a regular basis in order to ensure the program remains effective over time.

But in order for the program to remain effective, we need to understand not just how much investment has been made overall, and not just how many jobs have been created overall, but which projects are actually making a positive impact. This is one area where critics and proponents of Opportunity Zones agree: we need better impact tracking and reporting.

Reporting requirements were not a part of the original OZ legislation, and without measurement, any account of success or failure is purely anecdotal. While some want to throw the baby out with the bathwater, there is no need to do so: legislation like the proposed IMPACT Act can create reporting standards that will allow for a better understanding of where Opportunity Zones are succeeding and where they are failing.

Critics of the initiative can’t truly say it hasn’t helped those in poverty because they don’t have the evidence to back up those claims. With accurate data industry-wide, we’re confident the narrative around Opportunity Zones would change as the public saw the good these projects are doing for distressed communities.

Until there is any sort of industry-wide reporting requirement, we won’t know how effective Opportunity Zones have been or can be, but based on the program’s early success, it would be a mistake to give up on something that has shown such tremendous promise. What the industry can do now is institute best practices for impact measurement to demonstrate the extent to which the best OZ projects are already impacting communities.

JTC has long stressed the need for best practices in Opportunity Zones fund administration, and that includes the ability to measure and report on social impact. The truth is that industry leaders and social critics, though they may be on opposite ends of the OZ divide, actually agree on what the next step ought to be. By accurately measuring and reporting on impact, we can improve Opportunity Zones, and thereby improve our communities

Download  our Measuring Social Impact in Opportunity Zones Fact Sheet!

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