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February 5, 2019

Why Opportunity Zones Will Likely Increase Rents In Vulnerable Areas
By Tanya Sterling, February 05, 2019

WASHINGTON, DC—Opportunity Zones. The commercial real estate industry has been abuzz with the potential economic boom that comes with developing real estate or funding businesses in these new, designated zones located in distressed areas or blighted communities. Affordable housing advocates, though, have been concerned that these tax breaks may not trigger development in neighborhoods that really need it, but instead just spur plans and growth in communities that were already targeted for investments. They also worry that rents are going to increase when properties are “substantially improved” to meet the applicable Opportunity Zone conditions.

Their fears, at least about the latter point, may be realized, according to an analysis by the locally-based SP Group.

“We analyzed the current state of rental affordability in the designated opportunity zones using the 30% rule—that a household that spends more than 30% of its income on housing cost is considered cost burdened,” says CEO Pratima Damani. “Using this threshold, our team compared the median gross rents to the median household incomes in the census tracts designated as Opportunity Zones. We also observed that the majority of the tracts within the “cost burdened” tracts are located in California, Florida, New York, Illinois and New Jersey.”Read more.

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