Updated: Sep 18, 2019
But the Trump administration’s signature plan to lift them — a multibillion-dollar tax break that is supposed to help low-income areas — has fueled a wave of developments financed by and built for the wealthiest Americans.
Among the early beneficiaries of the tax incentive are billionaire financiers like Leon Cooperman and business magnates like Sidney Kohl — and Mr. Trump’s family members and advisers.
Former Gov. Chris Christie of New Jersey; Richard LeFrak, a New York real estate titan who is close to the president; Anthony Scaramucci, a former White House aide who recently had a falling out with Mr. Trump; and the family of Jared Kushner, Mr. Trump’s son-in-law and senior adviser, all are looking to profit from what is shaping up to be a once-in-a-generation bonanza for elite investors.
The stated goal of the tax benefit — tucked into the Republicans’ 2017 tax-cut legislation — was to coax investors to pump cash into poor neighborhoods, known as opportunity zones, leading to new housing, businesses and jobs.
The initiative allows people to sell stocks or other investments and delay capital gains taxes for years — as long as they plow the proceeds into projects in federally certified opportunity zones. Any profits from those projects can avoid federal taxes altogether.
Instead, billions of untaxed investment profits are beginning to pour into high-end apartment buildings and hotels, storage facilities that employ only a handful of workers, and student housing in bustling college towns, among other projects.
Many of the projects that will enjoy special tax status were underway long before the opportunity-zone provision was enacted. Financial institutions are boasting about the tax savings that await those who invest in real estate in affluent neighborhoods.
Mr. Scaramucci’s development in New Orleans offers a portrait of how the tax break works. His investment company, SkyBridge Capital, is using the so-called opportunity zone initiative to help build a hotel, outfitted with an opulent restaurant and a rooftop pool, in the city’s trendy Warehouse District.
The tax benefit also is helping finance the construction of a 46-story, glass-wrapped apartment tower — amenities include a yoga lawn and a pool surrounded by cabanas and daybeds — in a Houston neighborhood already brimming with new projects aimed at the wealthy.
And in Miami’s hot Design District, where commercial real estate prices have nearly tripled in the last decade, the tax break is set to be used for a ritzy new office tower with a landscaped roof terrace.
Some proponents of opportunity zones note that money is already flowing into downtrodden communities like Birmingham, Ala., and Erie, Pa. They argue that more funds will follow. And they note that because no data exists on where investments are being made, it is impossible to quantify the benefits going to the wealthy versus the poor.
“The early wave, that’s not what you judge,” said John Lettieri, president of the Economic Innovation Group, an organization that lobbied for the establishment of opportunity zones.
But leaders of groups that work in cities and rural areas to combat poverty say they are disappointed with how it is playing out so far.
“Capital is going to flow to the lowest-risk, highest-return environment,” said Aaron T. Seybert, the social investment officer at the Kresge Foundation, a community-development group in Troy, Mich., that supported the opportunity-zone effort.
“Perhaps 95 percent of this is doing no good for people we care about.”
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