Opportunity Zones, the Community Development Dilemma, and Census Tract Selection

By Jeremy Carter, Senior Director of Programs 

Through June of this year, all jurisdictions across the US will select census tracts to become new Opportunity Zones. Once finalized, these tracts cannot be changed and will remain a focal point for the flow of private investments for the next decade. Over the next 60 days, there is a unique opportunity to influence this selection process and advocate for the inclusion of census tracts you feel are primed for investment and, alongside good faith investors, could bring positive change to the communities you serve. There are few other times when you, as a nonprofit leader, can directly influence federal policy at the local level. The time is now.

Why Should I Care about Opportunity Zones?

Now, you may be asking, “Aren’t Opportunity Zones tax breaks for private investors with no requirements for affordability?” Well, yes…but nonprofits can still influence projects to be more beneficial for our communities. Let me explain.

Opportunity Zones (OZs) are low-income census tracts designated by the US Treasury where private investors, such as high-wealth individuals and corporations, can receive tax benefits for long-term investment into business, real estate, and infrastructure projects located within them.

The OZ program is neither inherently good nor bad for the community; it’s the way it is used that really matters. OZ deals are going to happen in our communities; that’s a cold, hard fact. It is imperative that the nonprofit sector finds ways to engage and elevate private investors seeking to bring beneficial projects into OZs and do everything possible to direct the flow of capital for the good of our underserved and at-risk communities. In short, we must lean in and leverage our available powers to shape the OZ process where we can, limit bad faith actors, and uplift those who seek to work with us.

How Do I Help Identify Eligible Census Tracts?

This brings us to census tracts. Governors in all 50 states, Puerto Rico, and U.S. territories (along with the Mayor of Washington, D.C.), are currently releasing information to guide the selection of census tracts to become new Opportunity Zones. This is a multi-billion-dollar decision.

The basics of eligibility are simple; tracts must be up to 70% Median Family Income (MFI), or a 20% Poverty Rate with up to 120% MFI. Once all prospective tracts are submitted to the Governor, each state can select up to 25% to send to the US Treasury for final designation this fall.

There are numerous maps online demonstrating which tracts are eligible for designation, including NALCAB’s own site. The NALCAB map, in addition to basic eligibility information, includes another layer of “eligible tracts that are experiencing high change” through the use of our proprietary Neighborhoods Trend Analysis. These tracts have metrics that suggest they are already experiencing increased investment activity, gentrification, and/or displacement pressures, making them more attractive to future developers due to lower inherent risk – capital attracts capital.

Using NALCAB’s map, you can identify which tracts in your community are 1) eligible to become an OZ and 2) most likely to already be undergoing rapid change and have favorable conditions for future investment. From that starting point, consider the following criteria:

• Does the tract have shovel-ready projects?
• Are there existing infrastructure and transportation amenities?
• Are there vacant lots, blighted properties, or buildings suitable for new builds, adaptive reuse, or rehab?
• Are zoning or local tax incentives favorable to new development?
• Is there a demand for new affordable housing or commercial spaces?
• Are adjacent tracts seeing increases in investment, growth, and gentrification?
• Are there major development projects (e.g., a new stadium, transportation hub, or hospital) already slated for the tract that could bring in additional investments?
• Are there community assets or properties you should consider acquiring or preserving ahead of future private investments in the area?

How Do I Participate in the Census Tract Selection?

Each state designed its own census tract selection process, so there is no single answer for how to participate. However, there are some basic steps everyone can consider:

• Engage early with the relevant state agency
  • Find the State Agency leading your OZ selection process
  • Attend informational webinars or community sessions
  • Call and email state offices for clarification
  • Set up intro meetings and position your organization as a resource for the office

• Draft a statement that outlines why your census tract merits being selected
  • Highlight any additional federal, state, and local incentives that can be combined with the OZ program
  • Provide data on investment suitability (shovel-ready projects, transportation, infrastructure, etc.)
  • Keep in mind that the OZ program favors new real estate investment, with most investments flowing to market-rate housing and commercial developments

• Find a champion at the local or state level
  • Many states limit tract submissions to only local municipal and county officials
  • During previous OZ tract selection, Governors heavily relied on local expertise to determine which areas to designate
  • Submit a nomination application, when possible, in coordination with partners
  • Some states allow economic development organizations or even private citizens to submit tracts for consideration

How Do I Learn More about Opportunity Zones in General?

Contact NALCAB and plan to attend the NALCAB National Conference! NALCAB will host a session on Tuesday, September 15, on Opportunity Zones and establishing private-nonprofit partnerships. This session is specifically designed for CDFIs and nonprofit development organizations to learn more about the policy and program implications of OZs and hear from mission-driven private investors on the nuts and bolts of OZ deals.

General Opportunity Zones questions can be emailed to jcarter@nalcab.org
All things Opportunity Zones can also be found at the US HUD Opportunity Zones webpage.

How Do I Find Mission-Driven Private Investors?

NALCAB wants to hear from you! We are curating relationships with mission-driven investors to support private-nonprofit partnerships and need to measure and document the interest from our members to create a pipeline of potential projects. Contact me at jcarter@nalcab.org
For a general inventory of OZ investors, including mission-driven individuals and entities, you can review the excellent Opportunity Funds List curated by Novogradac, including the investor’s geographic preference and focus area.

How Do I Learn More about the Census Tract Process and OZ Policy?

Questions on your state process or how to best advocate for a tract in your community to be included? General questions on policies around Opportunity Zones? Contact us at Policy@nalcab.org