Mar 6, 2019

"Opportunity zones" may not benefit poor, rural areas

Data: Develop LLC. Notes: City names refer to the larger metropolitan statistical areas defined by U.S. Census; "Large U.S. metros" refers to MSAs with at least 1 million people as of 2018; Values for each may not add up to 100 due to rounding. Chart: Harry Stevens/Axios

A new policy designed to attract investment to low income communities may not benefit rural areas and the most impoverished communities.

Between the lines: The majority of what are being called "opportunity zones," which are economically distressed census tracts nominated by governors to receive special investment tax breaks, lie within large metro areas. While most have low median income projections, quite a few are in relatively prosperous areas of major cities like D.C. and San Francisco, according to data collected by Develop LLC.

By the numbers: Only 3% of opportunity zones have a projected median household income of $75K or more, but certain well-known metro areas have a much larger concentration of these communities.

  • But there are also equally competitive small communities inside struggling metro areas, such as St. Louis, Detroit or Cleveland, Steve Glickman, founder & CEO of Develop LLC, told Axios. And investors could take advantage of the tax breaks by investing in less competitive markets where there is opportunity for a lot of growth.
  • "This whole program is meant to be a signal to markets, to stop focusing on the handful of places everybody's been investing in," Glickman said.

What to watch: Investors looking to take advantage of the new tax policy are faced with deciding whether to invest in communities where there is the most need or invest in impoverished pockets of areas that are already doing relatively well.

The bottom line: The prevalence of these zones in already rich urban areas shows the challenges in spreading wealth and opportunity beyond big cities.

  • Wealthy metro areas also have poverty-stricken communities. And there are strong, economically competitive "opportunity zones" in struggling parts of the U.S. Where companies decide to invest will determine whether the policy does, indeed, revitalize distressed communities or further cement the success of booming metro areas.

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