Throughout his presidency, President Donald Trump has touted his “Opportunity Zones,” passed as part of his 2017 tax cuts, as a means to bolster disadvantaged communities. The program designates certain areas, many of them low-income, as eligible for low-tax investment. For investments made in these Opportunity Zones, investors may defer their capital gains taxes, pay a lower rate or, if they hold on to their investments long enough, pay no taxes on their gains at all.
Furthermore, Trump has made Opportunity Zones a central aspect of his campaign for re-election, highlighting them in his second-term agenda and passing a new executive order to try to bolster their effectiveness. With more than $10 billion in investment being poured into the program, it’s imperative to analyze the actual success of Opportunity Zones thus far.
Unfortunately, their track record is poor. The Opportunity Zone program is incredibly insufficient in alleviating poverty in disadvantaged neighborhoods and has even served the opposite purpose in many areas, facilitating gentrification and the construction of luxury resorts rather than affordable housing. To help the people Opportunity Zones are targeting, we must go beyond poorly designed federal policy by turning to community organizing, activism and mutual aid.
Part of the reason the program is structurally flawed is due to the way Opportunity Zones were designated. Many communities that have since been gentrified were opted into the program based on outdated census data, and other areas that may be poor overall but still have a significant high-income population are eligible for investment.
Moreover, the ability to defer capital gains taxes incentivizes high profitability projects rather than projects with high social impact, leading wealthy investors to prefer building luxury housing or expensive hotels instead of affordable housing projects. And because the investment is mostly coming from wealthy people outside of the Opportunity Zones, people living in these communities have very little say in how the money is spent.
As a result, many investors are pouring billions of dollars into the most affluent and profitable developments, to the detriment of communities in need. In fact, one study by the Urban Institute found that Opportunity Zones have had little to no effect on disadvantaged communities.
Obviously, efforts to strengthen these communities must go further than poorly designed, ineffective, milquetoast federal policy and extend into real community outreach and organizations. We can’t wait for the federal government to fix the issues that it has ignored for decades. Many people are already taking their communities into their own hands, with tons of people starting amazing organizations working to better their neighborhoods.
For students of the Claremont Colleges, it’s important to engage with the broader Claremont, Los Angeles and Southern California community. There are several Opportunity Zones within a 10-minute drive from the 5Cs, including areas in Ontario and Pomona, and students should get involved in any of the multitude of organizations working to help local residents.
When we get back to campus, it’s important to remember that while the 5Cs may sometimes feel like a bit of a bubble, we’re still a part of a broader community that we have a responsibility to take part in. Many of us have strong beliefs about inequality, homelessness and social justice, and it’s imperative that we recognize the impact we can make on the communities around us if we actively participate in them.
If you want to go out for a bite to eat in Claremont and you have access to a car, it’s not much more effort to drive a little farther and support a restaurant in one of these Opportunity Zones. Spending money at small businesses puts money into the local economy and helps the community as a whole.
Outside of that, interacting with these areas can take plenty of different forms, from volunteering your time to donating to mutual aid funds to pressuring elected officials to take meaningful steps to address inequality. This activism should also carry over to your own cities as we learn from home in the fall, and possibly the spring. You can find areas designated as Opportunity Zones near you at this link.
The takeaway shouldn’t be that Opportunity Zones are a bad idea. They aren’t. There’s a lot of potential for social growth and positive community outcomes if the Zones are implemented correctly (likely by a different president), but we can’t see them as a panacea to our social ills.
As students, we can’t do much to change the way Opportunity Zones are designed. What we can do, though, is focus our efforts on supporting the communities around us in ways both big and small.
Sam Hernandez PO ’24 is from San Antonio, Texas. He is passionate about political equity and economic democracy.