An affordable housing project
Investors are hoping to raise billions of dollars for Opportunity Zones projects across the country, but critics worry little of that money will go to the troubled neighborhoods the federal tax incentive initiative was meant to help.
Now, the philanthropic Kresge Foundation is partnering with two investment firms that are launching Opportunity Zone funds, in an effort to ensure development projects go to communities most in need.
The Michigan-based foundation is partnering with Fort Lauderdale-based Community Capital Management and Boston-based Arctaris Impact. Community Capital and Arctaris are launching Opportunity Zone funds, seeking to raise a combined $800 million for projects and businesses in low-income areas throughout the country.
The Kresge Foundation has provided a combined $22 million investment in the two funds, in exchange for an agreement the funds will adhere to its guidelines. The foundation will create
a standardization of reporting for Opportunity Zone projects, in order to show that the funds deployed are creating jobs and helping the community.
The Opportunity Zones program gives investors and developers the ability to forgo and defer paying some capital gains taxes if they invest in any of the designated zones.
Investors are raising massive funds but most are waiting to deploy capital until more regulations are released from the U.S. Treasury Department and the IRS. David Sand of Community Capital said the company will start deploying capital after the next regulations come out. They are expected in the coming weeks.
This month, Housing and Urban Development Secretary Ben Carson said the agency will give preference to developers and investors who build affordable housing in federal Opportunity Zones when it comes to certain grants. Carson acknowledged the agency could not mandate the construction of affordable housing in the 8,700 designated Opportunity Zones nationwide.
The Kresge Foundation’s voluntary standards include showing how many jobs have been created, along with how much affordable housing will be built at each project.
Socially responsible investment groups like Kresge also want the government to include permanent legislation to mandate reporting requirements for each project.
Aaron Seybert of Kresge said the Opportunity Zones reporting standards will look similar to the requirements set forth in the New Markets Tax Credit, a tax incentive for developers looking to build in low-income areas.