Paul L. Caron

Thursday, January 20, 2022

Kaye: A Comparative Look At The Low-Income Housing Tax Credit And Opportunity Zones

Tracy A. Kaye (Seton Hall), Ogden Commons Case Study: A Comparative Look at the Low-Income Housing Tax Credit and Opportunity Zone Incentive Tax Programs, 48 Fordham Urb. L.J. 1067 (2021):

The Opportunity Zone (OZ) tax incentive to invest in economically distressed areas across the United States was introduced in the 2017 Tax Cuts and Jobs Act. This Article examines the Ogden Commons project, a mixed-use development in Chicago’s North Lawndale neighborhood, as a case study for OZ investments. Ogden Commons represents an appropriate implementation of the OZ incentive, but its successes also demonstrate the program’s shortfalls. For example, unlike other federal economic development programs such as the Low-Income Housing Tax Credit (LIHTC), OZ investors have few restrictions with regards to the projects they invest in. This much touted great flexibility for the OZ investments comes at the expense of little oversight.

This lack of oversight is only ameliorated when OZ projects include funds from other federal, state, or local programs in their capital stack as the Ogden Commons project has done. It is only because of these other programs’ requirements that projects must conduct responsive community needs assessments and surveys, which — for a program aimed at addressing distressed areas — should have been required for OZ projects from the start. Furthermore, the developer is using both qualified opportunity funds and LIHTCs to finance the different phases of the Ogden Commons project allowing for the comparison of these very different tax incentives. While the Ogden Commons project demonstrates a positive use of the OZ incentive, the tax incentive needs serious reforms to ensure that the OZ program will actually achieve its objective and justify the massive taxpayer dollars being spent on the initiative.

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