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An Opportunity Zone Falls in a Forest
Lemar, Anika
Lemar, Anika
Abstract
A recent press account summarizing research on the question of who benefits from economic development tax subsidies began:
At its best, the federal New Markets Tax Credit program has subsidized projects like a community-owned grocery store in West Oakland. Or a new permanent home for an immigrant rights organization in Queens, New York. Or the re-purposing of a 180-
acre former steel production site on the far South Side of Chicago into spaces for retail, green manufacturing and food production, and the largest indoor recreational space in the region. At its worst, the same program has subsidized high-priced condominiums or even convention centers that spark or accelerate gentrification. Unpacked, the paragraph contends that economic development
subsidies, when well-spent, fund amenities that do not lead to gentrification. The paragraph, however, makes a number of
assumptions about what sorts of subsidized transactions might yield gentrification: Community-owned retail does not lead to
gentrification and high-priced condominiums do. Consider, however, the preferences of potential gentrifiers, well-paid, college-educated people living in or near low-income neighborhoods. Many readers of the quoted article, in fact, are probably potential gentrifiers. And, as they read this list of subsidized deals, it seems likely that many of them thought to themselves, "I would love to live in a neighborhood with a community-owned grocery store." A community-owned grocery store - where presumably there had previously been no grocery store - would make many potential gentrifiers more likely to move to that former food desert. Similarly, an indoor recreational space sounds like an attractive amenity for families of all income bands.
But neighborhoods with convention centers are not generally considered particularly attractive. And the empirical research is quite
clear that even "high-priced condominiums" do not raise nearby rents and they sometimes help to stabilize or decrease them. That is not surprising: Developers like to build their "high-priced condominiums" where rents are already rising; they do not typically
look to roll the dice in low-rent neighborhoods with no preexisting upward rent trajectory.
In other words, the lede understood the conventionally accepted truth - high-end condominiums are a sign of gentrification - but
misunderstood the causation. And perhaps it also misunderstood whether the tax credits that subsidized these transactions actually caused the transaction to occur, a question we need to take especially seriously in the context of Opportunity Zones, the cousin of the New Markets Tax Credit that was the subject of this symposium.