Opportunity Zones Skip Over Hard-Hit Rural Places

Shelterforce is right on the money in their article, “Pushing Opportunity Zones to Fulfill Their Promise.” The piece urges urban leaders across the country to set guiding principles to make sure this new tax incentive, called the “most significant community development program to pass in a generation,” leads to equitable development and not displacement of low-income residents and people of color. Opportunity Zones were created by the federal tax overhaul in 2017 to entice private investors to underserved areas by eliminating capital gains taxes owed on prior investments if reinvested in Opportunity Zone communities for at least a decade. The new program has already attracted $28 billion in investment capacity.But many rural communities, like many urban neighborhoods, need outside investment to create jobs, build affordable housing, provide critical services, and incent broadband and renewable energy infrastructure. So why are rural communities barely targeted in the Opportunity Zone marketplace? According to the experts, the deals are too small, the risk is too high, the real estate doesn’t appreciate so as to produce capital gains, and investors don’t know rural places and players.At least six states, however, are testing strategies that can crack the code for rural. Three states, Kentucky, Alabama, and Texas, are seeking to sweeten the deal for investments in rural Opportunity Zones through proposed legislation enabling state tax credits on top of the federal ones. Just signed into law in the State of Washington is a new tax preference for state taxpayers who contribute to a Rural Development and Opportunity Zone Fund, for a total of $65 million/year. But perhaps most useful are Virginia’s, Oregon’s, and Alabama’s efforts to respond to the persistent challenge of limited development capacity in rural places—lack of local expertise to move qualified deals forward and connect them with state and national capital sources.