A new bill backed by the U.S. Department of Housing and Urban Development aims to raise rents for families who receive housing aid and set the foundation for work requirements. The proposed rent reforms will affect millions of families, setting new boundaries on aid and limits for the families who need help to pay their rent.
The Making Affordable Housing Work Act of 2018, a standalone bill that HUD introduced on Wednesday, would amend the Housing Act of 1937 to introduce new rent reforms and standards. Among other provisions, the bill raises the rent for families who receive assistance from 30 percent to 35 percent.
But the biggest sting will be felt among extremely vulnerable families living on frozen budgets far below the poverty line. Changes in the bill could mean enormous new burdens or evictions for the very poorest people in America.
In a call with reporters on Wednesday, HUD Secretary Ben Carson spoke about the long waiting lists for housing aid that greet applicants in every state. He mentioned the fact that just one in four households eligible for assistance actually get help, and noted that the budget barely covers rising costs for existing families.
“The current system isn’t working very well,” Carson said. “Doing nothing is not an option.”
His complaints echo those from housing advocates who have called on the Trump administration to increase spending on rental aid. Yet the solutions proffered by the administration—namely new eligibility standards and higher costs for families—have drawn sharp criticism from low-income housing advocates.
“Despite claims that these harmful proposals will increase ‘self-sufficiency,’ rent hikes, de facto time limits, and arbitrary work requirements will only leave more people without stable housing, making it harder for them to climb the economic ladder,” said Diane Yentel, president and CEO of the National Low Income Housing Coalition, in an email.
The bill establishes a new formula for calculating rent: Families must pay 35 percent of their gross monthly income or 35 percent of what an individual would earn working 15 hours a week for four weeks at minimum wage (whichever is higher). That minimum works out to $150, three times more than what families pay under the current dispensation.
The bill also establishes a new minimum rent for households who are exempt from paying 30 percent now, namely the elderly and disabled. If the bill passes, these recipients will need to pay at least a minimum of $50—a new floor that will introduce a cost burden for the most vulnerable aid recipients. For some households, especially those who earn less than $2,000 per year, it will mean a powerful shock.
As was widely anticipated, the new HUD legislation enables public-housing authorities and landlords who accept vouchers to set work requirements for people who receive aid. This bill does not specify the minimum or maximum hours that a housing authority could set, or address the nature of work involved with work requirements, but gives the secretary the power to set those terms through regulation.
New reforms under MAHWA include “alternative” rent structures, such as tiered rents, stepped rents, and timed escrows that public housing authorities can choose to adopt. These standards, to be established through future regulations, would serve as time limits for households receiving housing aid. Carson said the goal for these new reforms was to relieve lengthy waitlists.
“Oftentimes these waiting lists mean families must wait for years,” he said. “It’s clear for a budget perspective, and from a human point of view, [they are] unsustainable.”
Carson’s consistent theme in discussions about aid has been self-sufficiency, and the goal of these reforms, according to the secretary, is to boost incentives that put people into more financially stable situations. But as the country faces a broad dearth of affordable housing, limiting options—especially for families at or below the poverty level—has alarmed many housing experts.
“It isn’t clear that there’s any policy rationale behind this,” said Will Fischer, a senior policy analyst for the Center on Budget and Policy Priorities, referring to the reforms when HUD first floated them in February. “If you work, they raise your rent. If you don’t work, they raise your rent. If you’re elderly, they raise your rent.”
What happens to modern architecture when it ceases to stand for progress—when it ceases, effectively, to be modern?
Australian photographer Cody Ellingham started to wonder this when he encountered Japan’s government housing complexes, or “danchi” (the term means “group land” in Japanese). Danchi construction started in the late ‘50s, as part of Japan’s postwar boom. They were intended to represent a new era in Japan: they were created in a Western style, foregoing traditional, multi-generational Japanese homes made of wood for concrete towers built for nuclear families. With their refrigerators, televisions, and washing machines, danchi were seen as a way for Japanese families to become part of the nation’s upward trajectory towards modernity.
But times changed. Families wanted homes instead of apartments, the economy stagnated, and Japan’s birth rate declined. As a result, the communities within these Modernist complexes shrank as the buildings themselves stood still. Ellingham’s photos look like something out of the latest Blade Runner movie; they depict an ultra-modern landscape both technicolor and eerie. The density, platte, and concrete all look futuristic, but an element of decay is pervasive throughout. Ellingham photographed each danchi at night in part because it was the time the buildings would be most inhabited, yet they still appear to be deserted.
Though danchi may look hulking and monolithic, they are intricately designed. Windows in each housing tower are set opposite each other to provide natural light, buildings are arranged carefully to ensure that even ground floor apartments can receive sunlight, and each danchi has communal gardens and parks.
“I would not describe them as particularly beautiful buildings,” Ellingham wrote in an email to CityLab, “however the concept they embody—the slow decay of the Japanese dream of modernity—embodies a kind of transience, impermanence, that I think is one aspect of what we call beauty. More than that, there is a sense of awe and sentimentalism looking at row upon row of these buildings lit up on a cold winter’s night.”
In recent years, danchi have had a limited resurgence. In 2015, Quartz reported that the Japanese retail company Muji was turning old danchi into studio apartments by tearing down walls and updating the kitchens and bathrooms. Ellingham recalls a similar project that developed co-working spaces and and cafes inside a danchi complex.
But he believes these are exceptions. “The fate of most danchi is sealed,” Ellingham wrote. “Earthquake regulations and development costs mean whole sections are being torn down. I do not think danchi will disappear immediately, but just like the wooden structures that they replaced, the gradual decline of these buildings will happen slowly at first, and then before long there will be none left. Japan, and particularly Tokyo, has been destroyed and rebuilt several times and I think the only thing left for danchi is to let them be lived in and well used while they still stand.”
Cody Ellingham’s “DANCHI Dreams” will be exhibited on May 12 in Tokyo at the Takiguchi Atelier in Koto-ku.
Throughout the 20th century, as American metro areas sprawled ever outward, Detroit—the city that arguably made the modern suburbs possible—led the way. It began with developments in the auto industry; while early plants were multi-story, like 19th-century mills, the continuous assembly line required cavernous single-story buildings on larger plots of land than were available in the city. Between World War II and 1960, automakers built some 20 new facilities in Southeast Michigan, but not one in Detroit city limits.
“That drove the employment structure, and as the economy shifted all types of employment went to the suburbs,” says Avis C. Vidal, a professor in the Department of Urban Studies and Planning at Detroit’s Wayne State University. “Since the postwar period, there’s been a great deal of suburban housing built on the fringes—in excess of the number of households in the region.”
White flight, overly rosy demographic projections, and car-based planning continued to encourage patchy, rambling growth. And even as Detroit itself became a symbol for everything that was going wrong in America’s inner cities in the late 20th century, the sprawl prospered. Seven Fortune 500 companies now call the Detroit suburbs home, compared to three inside the city. By 2000, Oakland County, which borders Detroit to the north, was one of the richest in the nation. Meanwhile, Detroit was headed toward the largest municipal bankruptcy in history.
In recent years, however, buzz around Detroit—or, at least, the 7.2-square-mile area known as Greater Downtown, if not the city’s predominantly black residential neighborhoods—has been growing. The new Detroit has been earning a reputation as a hipster haven, but urban farms and bike shops aren’t what’s fueling its growth. In 2011, Quicken Loans founder Dan Gilbert consolidated the mortgage giant’s entire Michigan workforce—today, some 15,000 employees—in downtown Detroit, abandoning office space in the suburbs. Gilbert’s real estate company, Bedrock, is now Detroit’s largest landlord, and it just broke ground on a new 800-foot skyscraper, the centerpiece of a $2.1 billion investment that comes with the promise of 24,000 new jobs. According to real estate services firm Cushman and Wakefield, office vacancy rates in Detroit’s central business district and Midtown neighborhood are now just 10.9 percent and 8.8 percent, respectively, compared to 13.5 percent in the region as a whole—and down nearly two-thirds since to 2010.
Meanwhile, Ford, which pulled out of the city completely in 1996, will move its electric and autonomous vehicle divisions from neighboring Dearborn into Detroit’s historic Corktown neighborhood later this year. It’s a deliberate effort, executive chairman Bill Ford Jr. has said, to appeal to young workers who want to live and work in urban neighborhoods. And although a spokeswoman said the company was not ready to make any announcements, Ford’s plans for a Corktown campus are rumored to include Michigan Central Station, the abandoned Beaux Arts train station that has long been a dramatic symbol of Detroit’s decline.
It’s all exciting news for Detroit. Some in the suburbs, however, are watching these developments warily. As Detroit belatedly joins the nationwide urban resurgence, will its suburbs ride the city’s coattails, or will they struggle to compete? If Ford’s sought-after millennial tech workers want to be downtown, can the outlying, auto-centric communities that were so long synonymous with the region’s prosperity reinvent themselves in time to stay relevant?
Built in 1975 as the new home for the NFL’s Detroit Lions, the Pontiac Silverdome, with its state-of-the-art inflatable roof, would go on to host Superbowl XVI and appearances by Elvis Presley, Michael Jackson, and Pope John Paul II. But the Lions moved back to Detroit in 2002, and after years of neglect the Silverdome was imploded in December. Crews are continuing to deconstruct the remains, and city officials say they are exploring options to redevelop the site, which should be cleared by the end of this year. Meanwhile, the vast parking lot has found a less illustrious second life, as a graveyard for Volkswagen’s recalled “cheating diesels.”
The Silverdome, about 30 miles from downtown Detroit, is not the region’s only ill-fated suburban landmark. Long-abandoned Summit Place Mall, in nearby Waterford Township, is under a demolition order, after a scheme to turn it into a “sports and entertainment complex” never came to fruition. The NBA’s Pistons’ former home, the Palace of Auburn Hills, was renovated in 2015 but doomed to obsolescence when Little Caesar’s Arena opened in Detroit last September. While the now-shuttered Palace is surrounded by parking, Little Caesar’s sits at the center of a new, 50-block mixed-use development called “The District Detroit,” a so-far successful effort to tap into the modern mania for walkability.
The failure of a few landmarks does not mean Detroit’s suburbs are doomed, but some local leaders see writing on the wall. Oakland County’s famously abrasive county executive, L. Brooks Patterson, has long taken a vocal pro-sprawl position, but even his government is making an effort to invest in the county’s handful of historic downtowns, via what’s touted as the “nation’s first and only county-wide Main Street program.” Archetypal suburbs like Troy are also getting in on the act. While it may be hard now to imagine walking along Troy’s main drag, a busy six-lane thoroughfare called Big Beaver Road, the city recently installed wider sidewalks, revised zoning to encourage taller buildings and multifamily housing, and took a stab at transit with a trolley-style shuttle bus.
“Everybody’s trying to create places in Southeast Michigan, which didn’t really have places before,” says Barry Murray, director of economic and community development for Dearborn, which borders Detroit to the southwest. “And there’s a lot of interest in diversified housing options, from young people who want to be in the hearts of downtowns.”
Dearborn, with a bustling commercial center of its own less than seven miles from Detroit’s, is in a better position to adapt to the changing times than most of its suburban peers. The city has been Ford’s hometown for the past century, and while a few thousand Ford workers might be moving down Michigan Avenue, the automaker is also spending more than $1 billion to reimagine its Dearborn headquarters along the lines of a Silicon Valley Tech Campus, and to create a new mixed-use development around Dearborn’s historic Wagner Hotel. Murray expects at least 1,000 new apartments to come online over the next few years—at present, he estimates, 90 percent of the city’s 38,000 housing units are detached single-family homes. Meanwhile, a declining mall where 1,800 Ford employees are temporarily occupying an old Lord & Taylor is “an active planning area,” Murray says. “We know these retailers are not going to be there forever.”
Southfield, just across Eight Mile Road from Detroit, could tell Dearborn a thing or two about disappearing retail—last year, it began tearing down Northland Center, the first shopping mall in America. Since Amazon turned down the city’s offer of the site for its second headquarters, Southfield is moving forward with a plan to crisscross the property with through streets and make way for offices, restaurants, apartments and a park—an effort to create a downtown in a city built without one. Says Mayor Kenson Siver, “We have a lot of plans here.”
Southfield is also home to the region’s largest office complex outside Detroit, but Southfield Town Center—as the cluster of five golden glass towers is known—has recently been forced to compete with Detroit for tenants. This year, it will lose Microsoft’s Michigan Technology Center, which is following Fifth Third Bancorp’s regional headquarters to Detroit. Still, Siver remains sanguine, noting that other large employers have recently moved in, and Southfield saw more than $200 million in investment over the past year.
A Southfield resident of more than 50 years, Siver argues that the suburban idea—single-family homes, big yards, good schools, and highway access—will always appeal to a certain segment of the population. So while the community is working to add density where it can, he believes Southfield’s future lies not in imitating Detroit, but in emphasizing its differences.
“You would never hear me bash Detroit—I think we’re all in this together, and I’m glad to see Detroit thriving,” Siver says. “But clearly, not everybody wants to be downtown. The workforce is still in the suburbs. They have their kids in school here. And I’ve heard from employers who have considered Detroit but decide on Southfield because of parking.”
“Southfield has tons of free parking—convenient parking,” Siver adds. “And if people want to go to Detroit, they can get in their cars and drive 15 minutes.”
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What We’re Following
Opportunity knocking? A little-known item in the recent tax overhaul features a new incentive designed to lure investment to the nation’s poorest urban, suburban, and rural communities. These so-called opportunity zones would target systemic problems in distressed areas for the greater social good. Could they actually undo America’s geographic inequality? As CityLab’s Kriston Capps writes, that depends on how well cities and states pick the right places for investment. Read the full story here.
Scientists accidentally created an enzyme that can break down plastic. But is it any better than recycling?
Just a (Transpo) Bill
With the news of jazz pianist songwriter Bob Dorough’s passing yesterday at age of 94, we remember that his work at “Schoolhouse Rock” could sometimes be, dare we say, transit-oriented. The iconic “I’m Just A Bill” is technically about a transportation bill, regulating school buses stopping at railroads, and “Conjunction Junction” is all train track work once you get beyond “hooking up words and phrases and clauses.” (For the ultimate “Schoolhouse Rock” transit song, listen to “Too Long in L.A.” by Dorough’s longtime collaborator Dave Frishberg about Los Angeles’s evergreen congestion problems.)
In 2016, the U.S. Census Bureau found that it took the average commuter more than 26 minutes to get to work. That figure might sound less than much—26 minutes is about enough time to finish a podcast, after all, and some historians argue that a roughly half-hour commute has been
“The super commuters in areas where the housing isn’t necessarily super-expensive and there just isn’t transit infrastructure are concentrated more in the middle of the country,” said Sydney Bennet, a senior research associate at ApartmentList and the author of the report. “There’s a lot more people super commuting for economic reasons in those places.”
The media has a curious fascination with feats of extreme commuting. Readers seem to take pleasure in marveling at the “astonishing human potential wasted” by other Americans whose commutes are literally “killing them.” City Observatory’s Joe Cortright has long been a critic of this fixation, pointing out that the last decade’s growth in super commuters mostly reflects economic growth, and that the number of car commuters engaged in these grim daily rituals has stayed largely flat. Many super-commute stories are also tales of privilege—people determined to take on high-powered jobs in cities without uprooting their families. There’s the chief medical officer choosing to commute from her Boston-adjacent hometown to Manhattan, or the chief operating officer who flies from Toronto to Vancouver every week. And, indeed, super commuters overall do represent a more affluent subset of Americans, according to Bennet: About 2.5 million of the 4 million (or 62.5 percent) of super commuters nationwide make above the median income.
But the report also highlights the fact that many super commuters now look more like Sheila James, the health and human services worker whose epic schlep (she wakes up at 2:15 each weekday to travel by bus and train from Stockton to San Francisco) was the focus of a much-discussed New York Times piece in August.Super commuters like her are more likely to be using public transit, and that transit is not always serving them well.
The Miami Herald, for example, recently profiled hotel housekeeper Odelie Paret’s two-bus slog, for example, to draw attention to the affordable housing challenges facing Miami-Dade’s service workers, but it’s also an indictment of the area’s transit access: Her afternoon commute takes about two hours door-to-door, though she lives only 13.5 miles away.
Nationally, the vast majority (91.4 percent) of workers with shorter, “regular” commutes drive to work, ApartmentList estimates, compared to only 69.7 percent of super commuters. But the gap can vary widely from city to city. In Las Vegas, 95 percent of regular commuters drive, versus only 47.9 percent of super commuters. And in many such cities, it’s the state of public transit itself that is contributing to the conditions that create the painful super commute, says Bennet. “It’s really a lot of lower-income super commuters in areas like Las Vegas or Cleveland that are taking transit,” she said. “Not necessarily of choice, but out of necessity.”
Among those Cleveland super commuters, for example, 55 percent are earning below the metro area’s median income. (It’s worth noting, however, that super-commuting Clevelanders represent an extremely small community: A mere 1.3 percent of the Ohio city’s metro qualify.)
But ultimately, the report emphasizes the importance of improving public transit: “As more households are priced out of expensive cities and inner suburbs, without major investment in public transit, the growth in the share of super commuters is likely to continue,” it concludes. As fixes go, that’s neither quick nor easy, especially given the current political climate. But it’s also a solution that would improve the lives of all commuters, not just the super ones.
Heads up, cities: Economic growth does not necessarily go hand-in-hand with economic and racial inclusion.
That’s the finding of a new, in-depth analysis by the Urban Institute (UI) of the 274 largest cities in America. The report and accompanying data tool show how economic shifts in these cities since the 1980s have corresponded with “inclusion”—the ability of low-income residents and people of color to benefit from and contribute to the city’s economic gains.
To demonstrate that, the researchers first measured whether the city recovered its economic health between 1980 and 2013, a period that saw a series of downturns. Then, they looked at factors like income segregation, housing affordability, educational attainment, and job quality, that give a sense of the well-being of low-income residents. They also examined the disparities between white residents and communities of color with respect to such indicators. With all of this information in hand, the researchers set out to create separate rankings of the economic and racial inclusion in each city, as well as a combined snapshot of both.
One of their top-line findings: The ten cities faring the best on the inclusion metrics in 2013 were also flourishing economically. “There is a strong relationship between the economic health of a city and a city’s ability to support inclusion for its residents,” the authors write in the report.
In UI’s map, all the cities are represented as dots, with the bluer ones being more inclusive:
Fremont, California, tops the list of ten most inclusive cities in 2013, (many of which are in California). Clicking on the dot representing Fremont pulls up details of how it fared with respect to economic health (first image below), as well as on indicators of economic and racial inclusion over time (second and third image below, respectively):
If we were to leave it at that, it would seem like all cities needed to do to become more inclusive was to become wealthier. But other findings from the report challenge that notion. When the researchers zoomed in on the 41 cities where economic conditions had improved in this time period, they found that 23 were more inclusive overall, while 18 became less so. In other words, making the pie bigger didn’t guarantee everyone in the city a piece.
Plus, even where economic inclusion exists, it was not necessarily accompanied by racial inclusion. Sioux Falls, South Dakota, was 38th in terms of economic inclusion in 2013, for example, but at the very bottom of the list when it came to racial inclusion. Camden, New Jersey, was the opposite: in the 13th spot when it came to racial inclusion, but 271st when it came to economic inclusion. Overall, in 2013, more than half of the cities were very far apart on the two scales.
So what could we learn from the cities that were at the top? The end of the report focuses on the commonalities between four cities—Columbus, Ohio; Louisville, Kentucky; Lowell, Massachusetts; and Midland, Texas—all of which improved their racial and economic inclusion, as they recovered economically. One central theme throughout was that these cities appeared to emphasize racial and ethnic inclusion in their plans for economic development. Initiatives included bringing immigrant groups to the table, empowering local community organizations, and crafting education policies catering specifically to students of color. This approach appeared to promote a better economic future not just for the groups that had been historically disadvantaged, but for everyone in the city. (Previous research has shown that inclusive, diverse cities helps foster a better future for all residents.)
In a time of widening inequality, the findings of this report provide a roadmap for a deliberate effort to mitigate the forces that have created unequal communities. The authors conclude:
As this research illustrates, not all cities have made intentional progress, and, for some cities, economic conditions changed and prosperity was more widely shared. However, sustaining this progress toward more shared prosperity requires intentional effort, transparency, and policies.
What can a town do to advance clean energy locally if it is fed up with its incumbent, investor-owned monopoly utility? In the latest episode of the Local Energy Rules podcast, John Farrell, Director of ILSR’s Energy Democracy Initiative, interviews Andy Johnson and Joel Zook, community members and local energy leaders from Decorah Power, about an upcoming ballot initiative in Decorah, Iowa, and the culmination of an organized, grassroots effort by residents to take back local control of their electric utility and energy future. In a midterm election year, this is one vote that those who care about local, clean energy will not want to miss.… Read More
The pattern is the same throughout the world. People do not want garbage incinerators which pollute, need enormous amounts of capital and cap comprehensive job-intensive recycling, reuse and composting efforts. The staying power of anti incineration and pro Zero Waste campaigns prove this. In most cases a mobilized citizenry and small business sector and democratic institutions assure eventual victories over garbage incineration.… Read More
Have you ever wondered how many cigarettes you’re passively smoking while walking through the streets of a polluted, smog-infused city? No?
Well, a pair of digital developers just invented an app that will definitely (and accurately) answer that question. (Attention, smokers: You might want to quit after reading this.)
Shit, I Smoke! was created by Brazilian-born designer Marcelo Coelho and Paris-born app developer Amaury Martiny in just a week, after they read a study that analyzed air pollution and its equivalent to cigarette smoking. The article––co-written by Richard Mueller, a MacArthur fellow and physics professor at the University of California, Berkeley––explains a mathematical model that compares smoking and tobacco-related deaths to levels of PM2.5, a microscopic particle that is a dangerous, cancerous pollutant after combustion.
“Here is the rule of thumb: one cigarette per day is the rough equivalent of a PM2.5 level of 22 μg/m3 (…) Of course, unlike cigarette smoking, the pollution reaches every age group,” the study reads. It finds that Beijing has on average a PM2.5 level of 85 μg/m3, which makes for four cigarettes; Los Angeles County registered an average of half a daily cigarette, or 12 μg/m3, in 2016.
“The interface is pretty straightforward: It geolocates your phone, connects to the database, and shows the number of cigarettes smoked that day,” said Coelho.
The idea to develop the app is tied to Martiny’s experience living in Beijing, specifically during the years prior to the 2008 Olympic Games. “I personally saw a huge transformation of the city,” Martiny said. “In the beginning, I could see big blue skies, and there were not so many cars. It was quite pleasant.” But, according to Martiny, everything changed after the Chinese government started to emit a large number of pollutants from coal-burning plants, amid construction projects and other investments related to fast-paced industrialization in Beijing.
“The city changed its face, right before I decided to leave. It was really not livable; the air was horrible to breathe, and I just couldn’t stand to live there any longer.”
The app reveals that Parisians can effectively inhale between three and six cigarettes per day, while a person in Delhi could be smoking up to 20 cigarettes—without even touching one—on a bad day. Other urban agglomerations have worrying numbers, too (6.5 cigarettes daily in Mexico City).
“I was also surprised to see that Buenos Aires and São Paulo have the best air quality in all Latin America, despite the fact these are heavily populated cities,” said Coelho, who’s originally from the latter, Brazil’s largest city.
For both Coelho and Martiny, the app isn’t only a useful tool to inform users about their city’s air quality; it also makes this information more accessible and easier to comprehend. “These air-quality monitoring stations are just numbers, numbers that are very specific to professionals who work in environmental issues,” Martiny said. “So when you make this conversion to cigarettes, it makes it easier to understand what people are dealing with and the consequences air quality has in their daily lives.”
The developers’ plan now is to keep working on and enhancing the app’s features. This will most likely include monthly average cigarette rates, and enabling users to get data from cities other than the one they’re in.
On April 9, the Treasury Department debuted the first details of a new and far-reaching community-based tax incentive. In 18 states,newly designated zones could see a wave of new investment under a little-known provision of the recent tax overhaul.
These Opportunity Zones are designed to lure investment to the nation’s poorest urban, suburban, and rural communities with a powerful tax incentive.By the accounts of some experts, the program could deliver a vital injection to areas that haven’t yet recovered from the Great Recession. Yet it could also fuel gentrification in those communities where too much opportunity, too fast, has led to rapid displacement.
Nightmare scenarios under the Opportunity Zones program would mean tax benefits flowing to the wrong places or paying for the wrong things: Amazon receiving sweeping federal tax benefits to build HQ2 in D.C.’s Shaw neighborhood, for example, or payday lenders expanding their already substantial profile in places such as Louisville.
Or Opportunity Zones could just be, as critics contend, more of the same: the latest in a long line of economic development incentives that have failed to deliver. It all depends on how it’s implemented.
“Amazon HQ2 could figure out a way to make this [incentive] work [for the company’s benefit], potentially,” says Brett Theodos, a principal research associate for the Urban Institute. “Which is why zone selection matters so much. If we get places that really need the investment, it’s more likely those benefits are going to accrue to low- and moderate-income people.”
Congress created the bipartisan Opportunity Zones program as part of the tax bill passed last December. It’s an effort to try to rip up the stagnant and uneven pattern of economic development across the country, conditions that are dark and worsening. Even as the Department of Treasury confirms the remaining zone designations—for 32 more states, the territories, and the District of Columbia—leaders are hammering out the terms for Opportunity Funds, vehicles that will allow investors to defer their tax liability by investing equity into a number of different kinds of assets within a community. Final nominations for Opportunity Zones were due to Treasury on April 20.
The test of this program may be two-fold: first, whether cities and states pick the right places to be Opportunity Zones; and second, whether their federal partners set the proper guidelines for transparency and accountability.
Across the nation, a huge gob of census tracts were eligible to be designated Opportunity Zones—41,201 in all. (That’s a bit more than half of all the census tracts in the country.) State and territorial governors (plus the mayor of D.C.) were limited to picking just one-quarter of their eligible tracts to be Opportunity Zones. Unlike with Empowerment Zones, a more top-down Clinton-era predecessor, Opportunity Zones leave a great deal of discretion to state and local leaders as to where to steer the incentive.
“We don’t have a lack of capital in the U.S. We have a lack of connectivity,” says Bruce Katz, who until recently served as a scholar for the Brookings Institution. “We have a matching problem. This incentive might accelerate our ability to match up.”
Katz is not a disinterested observer. He recently teamed up with Jeremy Nowak—a fellow at Drexel University’s Lindy Institute for Urban Innovation and Katz’s co-author for The New Localism: How Cities Thrive in the Age of Populism—to launch a consultancy related to Opportunity Zones. This work is taking them across the country to talk with leaders and investors alike about the program. Consider them matchmakers.
In Louisville, for example, that might mean turning an under-used high school into a vocational training facility. That’s one idea for an investment opportunity in Louisville’s historically black, near-downtown neighborhood of Russell, where Katz says he talked about the possibility with a school superintendent. A program to boost on-boarding makes sense for Russell (and for Louisville, and for Kentucky as a whole, and really, for America). The idea is that new investments will work hand-in-hand with other factors—assets, existing programs, benefits, local conditions—to generate new jobs and also produce new skilled workers to fulfill those jobs.
Below is a map showing Louisville’s Opportunity Zones, courtesy of a tool built by Enterprise Community Partners. The Opportunity Zones designated by the state appear in orange. Russell, just west of downtown Louisville and across the highway that segregates the city racially and economically, is among the designated zones.
Other areas that meet the main criteria for eligibility but haven’t been designated are shown in blue. These are Low Income Community census tracts: areas with either a poverty rate of at least 20 percent or a median family income less than or equal to 80 percent of the area median income. Some tracts are eligible because they are adjacent to Low Income Community census tracts, even though they don’t have quite the same poverty profile; rendered in green, these contiguous tracts can make up only 5 percent of a state’s nominated zones. (Another 200 select tracts around the nation with especially high migration rates or low population levels were also granted special eligibility.)
In a month, Treasury will release the final Opportunity Zones. These designations will last a decade, meaning that decisions by state and local leaders will determine the fate of the federal program. That’s key in differentiating Opportunity Zones from the New Markets Tax Credit: Local governments get say. Only one-quarter of eligible tracts will be open to Opportunity Funds. Local stakeholders’ decisions in choosing between qualifying tracts will be especially consequential.
“There’s a lot of variation in how much capital the qualifying census tracts are accessing,” says Theodos, who led a project at the Urban Institute to show where Opportunity Zones could do the most good (and where they might not). “That means that some places need the incentive more than others, and that ranges of course across place as well. The governors have a lot to choose from, and their choice matters quite a bit.”
The program’s authors say that Opportunity Zones can offset a tilted economy. At a time when inequality is practically a new national anthem, access to capital is especially skewed, geographically. Whole swaths of the nation have seen a decline in large banks lending to small businesses or opening new branches. Smaller and regional banks have struggled to keep up with the majors (or they’ve been absorbed by them). In some places, banking disparities are the result of racial discrimination, while other areas are just being left behind.
At the growth end of the spectrum, venture capital is highly concentrated in a handful of metro areas, and so is high-wage job growth. Sacramento, Philadelphia, Buffalo, and Hartford have lost high-wage jobs to Austin, Nashville, and Denver. Growth in places hit hardest by the Great Recession—in cities such as St. Louis, New Orleans, Rochester, Columbus, and beyond—is mostly confined to low-wage sectors.
“Given the trends we’re seeing in the economy, this is the right time and a necessary time to be reevaluating the policy toolkit that we use to address economic disparity at the community level and the regional level,” says John Lettieri, cofounder and president of the Economic Innovation Group, the think tank that helped to write the legislation. “The toolkit we use now does not equip us very well to deal with the trends that we’re seeing, which don’t look anything like the trends we saw in the 1990s or 2000s.”
Here’s how the incentive works: Individual or corporate investors can defer their capital gains on investments in Opportunity Funds for a certain number of years (and in limited cases, permanently). The asset classes in Opportunity Funds are broad and flexible, with few set parameters: think affordable housing, real estate, infrastructure, and even transit. Cities, suburbs, rural enclaves, and regions can establish their own Opportunity Funds to identify needs ranging from hyperlocal (small businesses) to intra-state (transit).
The new tax incentive is not a strategy by itself, Lettieri says. The fact that states need to “down select”—or narrow down a list of many eligible tracts to final nominated zones—was baked into the legislation. The program will only work as well as local and state leaders plan it to work. There’s nothing preventing a state from parceling out its Opportunity Zone incentives to places that are already gentrifying, as appears to be the case in Cleveland.
“The Opportunity Zone incentive is not a silver bullet,” says Steve Glickman, cofounder and CEO of the Economic Innovation Group.
Cities like Louisville have a few different kinds of urban markets to consider. There’s the medical district on the east end of downtown, which works like an innovation district. There’s the area of the city near the University of Louisville that has a strong engineering focus. The near-in but economically fenced-off west end is another typology—but it’s an area that the market has historically ignored or discounted or failed to appreciate.
The promise of Opportunity Zones is that self-selecting communities can identify their assets and signal their potential to investors. An Opportunity Fund that drives investment into small businesses and real estate into neighborhoods like Russell in Louisville could be a model for Opportunity Zones in other cities that are similar to Russell (and vice versa). The same way that innovation districts and anchor institutions resemble one another (as markets) from one city to the next, so will the to-be-determined opportunities in distressed communities—from South Bend to Louisville to St. Louis and beyond.
“[The market]’s going to begin to understand that the country has these typologies, has these categories, of different kinds of geographies and assets which then lend themselves to certain kinds of investment,” Katz says. “It’s not like, at the end of the day, we’re dealing with hundreds of radically different kinds of propositions. I think this is going to be a market that routinizes.”
Kentucky’s Opportunity Zones cluster in urban tracts in Louisville, Lexington, Bowling Green, and outside Cincinnati. But many more eligible tracts (and Opportunity Zones) fall in exurban and rural areas—places where the reach of banks is declining, job growth has fallen off, and home mortgages are more likely to be under water. Much more of the country looks like these places than like the white-hot markets of Boston, New York, San Francisco, Seattle, and Washington, D.C.
Whether the Opportunity Zones program can avoid the mistakes of Empowerment Zones and other place-based incentives depends on what places leaders pick. In Texas, for example, San Antonio Mayor Ron Nirenberg submitted 27 tracts for consideration to the state: a few downtown but most of them stretching further out into Bexar County. (Texas Governor Greg Abbott included 24 of them in the state’s final 628 nominations.) Knowing whether Nirenberg called it right means weighing a host of thorny factors related to race, class, blight, potential employment centers, and more.
Socioeconomic change red flags
For the Urban Institute, Theodos’s team charted various kinds of capital flows for every eligible Opportunity Zone tract out there. The project assigned each tract an investment score, a value based on four factors: commercial lending, multifamily lending, single-family lending, and small-business lending. Tracts with a high ratio of investment in one or all these categories earned a high investment score. At such a small geographic level, a high score can sometimes reflect a skewed reality: a concentrated share of low-income housing, for example, or a prison construction project.
Theodos also generated a “socioeconomic change flag” as a measure of demographic change in every tract.
Put simply, it’s an indicator for gentrification. Tracts that earned a flag have showcased enough socioeconomic growth already that they don’t need economic stabilization. For these neighborhoods, Opportunity Zone designation could mean property tax shocks, luxury development, displacement, and all the other undesirable effects of geographic disparity that the program is trying to solve.
In Louisville, the census tract that matches up with Russell—where investment might take the form of a new vocational school—has an investment score of 9 (out of 10). That means a high level of existing investment, mostly in small businesses (which may reflect the $29.5 million that the neighborhood received through another federal program, the Choice Neighborhoods Initiative). Only one of the eligible tracts for Jefferson County (i.e., Louisville) earned a socioeconomic change flag, the gentrification bat-signal in Theodos’s analysis. Kentucky leaders skipped this tract, although they designated almost all of its neighbors as Opportunity Zones.
In some urban areas, it may be hard to designate Opportunity Zones without running the risk of transforming the neighborhood. For example, nearly every census tract in Baltimore City qualifies as an eligible low income tract, but large parts of Baltimore definitely do not lack for private investment. By the Urban Institute’s measure, nearly 20 percent of Baltimore City tracts are already gentrifying. A tax incentive for investors to build up areas like Fells Point or Station North—the places where investors are happily building already— will do the opposite of what the program’s framers intended.
“Those communities that have experienced a lot of social change, it may well be that low- and moderate-income residents are not able to remain and benefit from the incentive,” Theodos says.
Treasury has not yet released Maryland’s designations. Same with Washington, D.C., a unique city-state with no rural areas within its 68-square-mile boundaries. Almost half of the District’s Opportunity Zone–eligible tracts got Urban’s gentrifying marker. The new tax incentive could carefully guide investment toward the parts of the city where it is still badly needed, or it could pour gasoline on a market that’s already white hot.
“I think it’s all over the place. I saw a few instances in which states seemed really sophisticated and knew what they were doing,” Nowak says. “They’re grappling particularly with what urban areas can grow, and really grappling with the rural issues, which are really hard. Then I saw other examples where states just said, ‘Give us your tracts, we’ll use those and see if we can get them all in.’”
A federalist approach
Even as the administration is still mapping out where the nation’s Opportunity Zones will go, policymakers and stakeholders are puzzling out what Opportunity Funds will mean to investors. Lettieri and Glickman say that the breadth of possibility for Opportunity Fund investments is critical to ensuring that it works as an incentive for struggling communities across urban, suburban, and rural settings. The same tax incentive might build workforce development in rural Appalachia or affordable housing in downtown Atlanta.
“If these projects are used broadly to accomplish social good, to build affordable housing, to create new businesses and help businesses expand, then this program will be able to create a new ecosystem of community development financial institutions and equity investors coming together to support businesses and developers to do work,” Theodos says.
“Alternatively, if it’s used by payday lenders to grow their payday footprint, that might have a different effect on the local community,” he adds.
But the upside is substantial, too. Nothing in the U.S. serves quite the same role as, say, Sweden’s Kommunivest, a consortium that enables municipal governments to raise capital by issuing green bonds. Done right, Opportunity Zones could serve an unfulfilled intermediary role between capital and places where capital has evaporated.
The problem is larger than a missed marketplace opportunity. Economic anxiety in America is linked to sincere systemic problems, from lifetime earnings gaps to lower childhood achievement gaps to higher suicide rates. “Worst of all, the longer the unemployment spell, the less likely the possibility of reemployment—and by extension the opportunity to escape these terrible costs—becomes,” reads a white paper by Jared Bernstein and Kevin A. Hassett. The Economic Innovation Group released the bipartisan paper in 2015 as its mission statement for Opportunity Zones.
Depending on what local and state leaders do with it, the program may exacerbate some of the problems stemming from growth in high-octane areas. But there are worse problems, and those are the ones that Opportunity Zones were designed to target.
“I think cities, counties, and states are grownups,” Katz says. “Let’s take [this program] at its word and see if we can—in a classic, American, federalist, distributed way—figure it out.”