Opportunity Zones: Transforming America’s Disinvested Communities For A Better Future For All

On April 11, 2019, the Penn Institute for Urban Research, in partnership with PIDC, Enterprise Community Partners, the Weitzman School of Design, and the Wharton Social Impact Initiative, sponsored a daylong symposium, Opportunity Zones: Transforming America’s Disinvested Communities for a Better Future for All. This series of expert panels gathered academics, practitioners, and government officials to discuss the potential implications for the new Opportunity Zone tax incentive, including its ability to transform disinvested urban neighborhoods and provide greater opportunities for local residents and business owners. Throughout the day, panel participants detailed the strengths and weaknesses of how this new tax incentive can promote social inclusion and economic development, as well as the methods and limitations for measuring its outcomes to incentivize accountability and foster community engagement.

Susan Wachter, Sussman Professor and Professor of Real Estate and Finance, The Wharton School and Co-Director, Penn Institute for Urban Research, University of Pennsylvania, along with Wendell Pritchett, Provost and Presidential Professor of Law and Education, presented welcoming and introductory remarks. Wachter and Pritchett discussed the unique conditions through which the Opportunity Zone incentive operates in Philadelphia. With 26% of its population living below the federal poverty line, an extra incentive could bring new investment into Philadelphia’s more neglected neighborhoods. However, without proper oversight, there is no guarantee that new development will bring jobs to the communities most in need. Is there a way the incentive could foster more inclusive development practices? The best place to answer this question, Wachter and Pritchett noted, is at a large anchor institution like the University of Pennsylvania, which plays a major role in interpreting new government policies.

The first panel covered three case studies of Opportunity Zone developments. Public officials and practitioners from Philadelphia, Baltimore, and New Jersey discussed the ways in which cross-disciplinary collaboration could encourage more inclusive approaches to this new tax incentive. Anne Bovaird Nevins, Chief Strategy and Communications Officer, PIDC, noted that Philadelphia has more than 80 designated Opportunity Zones within city limits. Nevins highlighted Philadelphia’s growing and diverse economy, which the new incentive can build on by connecting resources to entrepreneurs as an additional tool in the regulatory toolkit. The following discussion noted that without clear definitions and clarification of the purpose of Opportunity Zones and whom they are intended to serve, there could be negative implications and unintended consequences.

The moderator of the first panel was Lisa Servon, Professor and Department Chair, City and Regional Planning, Weitzman School of Design, who noted that Philadelphia’s community participation and involvement has been historically limited, and questioned the participants on how their work in other cities would improve on this record. In New Jersey, for example, stakeholders from across the state created a task force to develop a formula that ensures a focus on inclusive and equitable development. Panelists agreed that the focus of the incentive should be on matchmaking, and that builders should work in Opportunity Zones in which they already have an established connection. While the physical boundaries of Opportunity Zones have been set, there have not been complementary efforts to gather information and data on these areas. The lack of easily accessible information means otherwise interested business owners and investors may face a barrier to entry in starting an Opportunity Zone project.

The second panel built on these discussions and explored how various real estate developers and investors are thinking about Opportunity Zones in Philadelphia, Newark, and Baltimore, as well as in urban areas elsewhere. Looking to examine how Opportunity Zones can spur economic development alongside social inclusion, panelists discussed examples of how public-private partnerships and practitioners are addressing the new incentive. The second panel also expressed concern over the potentially uncertain outcomes of the Opportunity Zone incentive. David Bramble, Managing Partner, MCB Real Estate LLC, explained that his concern was not that there would not be enough capital available, but rather that without proper legislation regulating transactions, predatory deals could exacerbate the already precarious state of many of these communities. However, because no Opportunity Zones are exactly alike, it is difficult to create broad regulatory legislation that applies to all cities nationwide. 

Many of the speakers on panel two echoed the concern over potential investor and business-owner disconnect from interested communities. Nancy Wagner-Hislip, Chief Investment Officer, Reinvestment Fund, was apprehensive that “some of this investment may never find a home.” Overall, the conversation focused on the need for further clarification of the metrics for the Opportunity Zone tax incentive. While some panelists were optimistic about the possibility of equitable wealth creation within these communities, others underscored that there was no regulation in place to hold investors accountable. Egbert Perry, Chairman and Chief Executive Officer, The Integral Group LLC, emphasized the fact that the incentive has no way to account for or reward social impact, and that money enhances yields, which can prevent deals from occurring.

The final panel reflected on lessons learned and examined optimal next steps for catalyzing public-private partnerships in order to positively transform urban communities. While there will always be excitement at the start of any new initiative, the tax incentive’s potential will depend largely on having a localized framework and a mechanism for reporting on bad policy. Anne Fadullon, Director of Planning and Development, City of Philadelphia, noted that while the tax incentive contains plenty of potential she does not believe that it will transform the most disinvested communities. Rather, because it comes with no guardrails and there is a fair amount of missing information, it will likely benefit communities that are already experiencing investment. While the panel agreed that some of the private sector is interested in investing in “overlooked and underestimated” communities, without a common understanding and framework, the margin is wide for negative outcomes.

All participants noted the potential for Opportunity Zones. However, due to the unclear definitions and the challenges around matching up interested parties, many were weary of the potential for misuse and exploitation. The critical next step that most panelists suggested was to encourage multi-perspective collaboration in defining and regulating the Opportunity Zone development process. This would ensure that any investment gained reaches the community and its residents. It is also equally as important that local governments step in to hold people accountable to ensure that investment is equitable and inclusive. While there are limitations to the Opportunity Zone tax incentive, the participants agreed that its flaws should not prevent implementation and development. Brian Berry, Senior Vice President, LCOR, wisely stated that planners and practitioners cannot “let perfect be the enemy of the good.”