At the National Trust’s 2019 PastForward Conference in Denver, Opportunity Zones were a popular topic. Opportunity Zones have gained significant attention and notoriety as either a potential new tool for historic preservation or a modern iteration of Urban Renewal. For those that missed the session, “Opportunity Zones and Historic Preservation: At the Crossroads (slides)” provides an overview of the Opportunity Zone (OZ) incentive and how preservation organizations and local communities are responding.
Several rounds of guidance from the Internal Revenue Service has likely slowed the anticipated roll out of OZ investments, but Meridian Capital Group Commercial Real Estate Survey reports that as of April, 2019, 88 OZ funds had already raised $26.4 billion, with many more billions expected to be raised before OZ designations expire at the end of 2028. How and where these billions of dollars will be invested is difficult to track given the incentive currently lacks mandatory reporting requirements.
As noted by the Local Initiatives Support Corporation (LISC), the types of OZ investors will vary. On one end, Opportunity Funds will raise capital from socially responsible investors that will anticipate smaller returns of around five percent. On the other end, private equity fund investors will expect double-digit returns that will compete with more traditional real estate investments. In the middle are preferred equity investment models with 6 to 10 percent annualized return expectations.
The Administration and Congress are taking steps to support implementation of the OZ program. In early October, the White House Opportunity and Revitalization Council announced the launch of its Opportunity Zone website. The website is intended to serve as a hub of information for residents, state and local leaders, investors, entrepreneurs and others who are interested in OZ’s. The site includes an interactive map of all OZs, links to OZ-focused websites from states and territories, tools and resources to help OZ residents and complement qualified opportunity fund investments, and a list of action items for each White House Opportunity and Revitalization Council agency.
On Capitol Hill, legislation (S. 1344/H.R. 2593), introduced last May by Senators Scott (R-SC) and Booker (D-NJ) in the Senate and Representative Ron Kind (D-WI-03) in the House, proposes to implement federal reporting requirements for Opportunity Zones to understand the success of zone designation and to ensure positive community impacts. More specifically, the legislation would require investors to submit the total amount invested, the type of OZ business, the type of activity, and job creation and housing production data to the Secretary of the Treasury. If enacted, this legislation will assist the preservation community's assessment of the impact OZ’s are having on historic properties. In the meantime, however, significant fundraising for and development in OZ’s will continue.
The National Trust created an internal Opportunity Zone task force made up of colleagues from the National Trust, the National Trust Community Investment Corporation, and the National Main Street Center to track the OZ incentive. Several resources are available to help stay abreast of OZ policy at the federal and state levels. On the Forum website, preservation stakeholders will find a national map that includes the location of every OZ and the location of nearby historic tax credit projects. Advocates may also reference comment letters to the Department of Treasury and the Department of Housing and Urban Development in support of historic preservation in OZ’s, the need to preserve community character and reduce displacement, and the vital role historic tax credits can and should play in revitalizing OZ’s. Preservation advocates should take time to meet with state and local officials to encourage historic rehabilitation in Opportunity Zones as investments in these areas starts to pick up.
During the Opening Plenary of PastForward, Dana Crawford, Denver’s larger than life preservationist and developer, offered an important and timely piece of advice — If you have a preservation success story associated with an Opportunity Zone, make sure to share it far and wide.
Shaw Sprague is the senior director of government relations at the National Trust for Historic Preservation.