Opportunity Zones Open the Door to More Rip-offs of the Poor

New Orleans    The Trump-McConnell-Ryan tax giveaway of 2017 is a bad penny that just keeps coming up again and again.  Although it was a stupendous tax break for corporations and the rich, the president tried to disguise its real purpose by claiming it would give working- and middle-class taxpayers a break.  Headlines abound now about unhappy tax filers who are shocked at the lower level of their refunds and the denial of longstanding deductions.  High property tax states on each coast are still screaming as well.

Unfortunately, that’s not even all of the bad news.

The act included a provision creating “opportunity zones” that provided an additional tax break for investments in areas that were economically hard-hit.  As desperately as poor and depressed areas need new opportunities, once again, as these zones are designated by state governors, they are being diverted to benefit investors and real estate developers instead.  With a real estate promoter, speculator, and sometime developer as president, why are we surprised, no matter how cynical and corrupt this distortion is becoming.

Financial firms are creating special pools for investors to get-rich-quick or probably more accurately keep-rich by putting money in these funds and harvesting the tax benefits while they wait for the projects’ payoffs.  Even some business observers are noting that the program will largely add additional tax savings to projects that were already in development and under any circumstances would have happened anyway.  A legion of others examining the political lobby and the determination of the zones note that they are unlikely to benefit the poor and in fact in many cases will displace those very families by accelerating gentrification.

Equally unsurprising is that much of this idea can be credited to the same tone-deaf, libertarian business-myopia of Silicon Valley since it originated in a supposed think tank funded by tech maven Sean Parker, originally of Napster, then Facebook, and other projects.  In typical tech fashion there is no accountability, no reporting requirements, no cap on the amount of benefits allowed each year, and, this hurts to say, no requirements that local residents benefit.  In fact, if the investor sticks with the project for ten years, they would owe no capital gains on any profits ever making this a super sweet deal for them, rather than the lower income and depressed communities meant to benefit.

In Louisiana for example, much of the Central Business District is now a zone in New Orleans, as is all of downtown Baton Rouge as is “parts of the city’s MidCity corridor, which has in recent years attracted a rush of investment,” according to the The Advocate.  Their reporting also found that the undeveloped area near the New Orleans convention center and an old power plant, both owned by big time local real estate and hotel operators.  Of course, none of these qualifies as a low-income area, but there is a provision in the tax giveaway law that allows some areas that are “contiguous” to also be designated.  The policy director of the Greater New Orleans Fair Housing Action Center, Maxwell Ciardullo, noted to The Advocate that developers “could bring mixed-income buildings with some affordable and some market-rate housing in areas where some residents are being displaced.  They also could bring luxury apartments.”

Since there’s no accountability and no requirement that the residents’ benefit, let’s be honest, developers and investors can do any damn thing they feel like doing and be subsidized by all of us as taxpayers while they walk back and forth to the bank over and over, ripping off lower income and economically distressed area for their own greed and benefit.

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Real Estate Wealth Taxes as a Anti-Gentrification Tool

New Orleans   Recently I listened to an interview with a prominent local developer on WAMF in New Orleans as he was asked about gentrification.  He tried to walk the line between his self-interest and progressive values.  He was against displacement on one hand, but he opposed inclusionary zoning that would require developers to create affordable units in their properties.  He claimed it would sacrifice three units for every one that it created without mentioning that most of the three units built would be for high-end customers.  He opposed a tax on developments that would fund affordable housing or homeless programs.  He claimed the city and state had no money, so the real solution to gentrification had to be federal.

In some ways his argument was breathtaking in its chutzpah.  He was claiming to believe that gentrification was in some ways a pejorative term for a natural process, while opposing displacement, protecting his self-interest, and at the same time presenting himself as an advocate of a national remedy.  Unsaid was the fact that given our Developer-in-Chief president and the current situation in Congress and HUD, the chance of a federal remedy is much less than that odds Vegas would give a snowball in hell.

Chuck Collins, director of the Program on Inequality at the Institute for Policy Studies, in a commentary in YesMagazine made a much stronger, more realistic case for local action, saying:

Municipalities should move with due haste to enact high-end real estate transfer taxes, requirements for the disclosure of beneficial ownership, and regulations aimed at the disruptive impact absentee-owner-investors are having on our cities.

Collins doesn’t claim this will stop gentrification but makes the case that it will discourage “rapacious global capital” from exacerbating displacement and artificially increasing ownership and rental prices by discouraging the kind of offshore wealth capital “parking” that has been so destructive in Vancouver and London.  As an example, he cites the situation in San Francisco, another favor of “ultra-high net worth individuals” with over $30 million in assets, where voters passed a high-end real estate transfer tax on residential and commercial properties with $5 million price tags and higher.  According to Collins, the tax…

“…the tax expected to generate $44 million a year, which has been allocated to fund free tuition for residents at San Francisco Community College and help pay for the city’s tree maintenance program.”

That’s not the same as building affordable housing, but it’s moving in the right direction.  Furthermore, there’s no reason it could not leverage other funds to construct affordable housing or provide city-based rent subsidies.

We can’t wait for Washington.  We have to act now, and whether a real estate tax on $5 million or $1 million or whatever, if such a tax builds local equity by creating affordable housing or other programs that fight displacement, it’s worth a fight.

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