There is a growing body of evidence that the more time an individual spends living in a distressed community—especially at childhood—the worse that individual’s lifetime chances of achieving economic stability or success. Yet, more than 50 million Americans do live in such neighborhoods.
Now, the beginnings of a solution to this problem has arisen from a rather unlikely place, and a window of opportunity has opened for investors wanting to have a positive impact on our country – Qualified Opportunity Zones.
The Tax Cuts and Jobs Act created quite a stir when it was first drafted and eventually passed, with all sides of the political spectrum arguing for and against the proposed changes. Tremendous divides exist on just about every major issue in Congress. On taxes alone, the estate tax, pass-through business taxation, certain personal tax matters, acceptable deductions and the various waivers, each and collectively, are lauded or criticized. However, opportunity zones (or O-zones, as they are sometimes called) stood out as the one policy attractive and beneficial to members of Congress on both sides of the aisle.
Qualified Opportunity Zones were originally introduced in the Investing in Opportunity Act (IIOA) during the 114th Congress; it was reintroduced in 2017 in the 115th Congress by senators and representatives from both sides of the aisle, and it received nearly 100 congressional cosponsors. The goal of these O-Zones is to strengthen distressed neighborhoods across the United States through economic development and incentivize job creation in those communities.
Why do we need Opportunity Zones?
In the years since the housing recovery began, investment and development has been concentrated in “superstar” cities, including New York, Los Angeles, San Francisco, Miami and Phoenix. Meanwhile, more than 50 million Americans live in distressed neighborhoods which have yet to see much of any economic resurgence or development.
With so many people living in less-fortunate regions, governors in every state were tasked with identifying areas clearly demonstrating both the need and capacity to absorb new developments, where private capital could trigger significant economic change if properly invested. Hence, the creation of Opportunity Zones.