A Sustainable Cities Network article (2018-12-19) announced that a Smart Growth America study has found Maryland ranks among the top 10% for Opportunity Zones from a Smart Growth perspective. This is according to the National Opportunity Zone Rankings Report released in December of 2018 by LOCUS, a program within Smart Growth America, and the Center for Real Estate and Urban Analysis at George Washington University.
As previously reported on Conduit Street, the federal government created Opportunity Zones as part of the 2017 tax reform legislation. Opportunity Zones are state-designated census tracts that encourage long-term private investment in low-income communities by providing federal tax breaks on any capital gains that result from specific investment in those communities. The designations are subject to federal approval. The overall tax value of Opportunity Zones is over $6 trillion dollars.
The Ranking Report looked at all states that had designated zones and applied a Smart Growth calculus to determine the top 10% that were best positioned to bring social, environmental, and economic benefits to distressed communities. From the Report’s executive summary:
History has repeatedly demonstrated that investment without protective equitable policy and process mechanisms leads to gentrification, displacement and a lack of access to benefits in many low-income and communities of color. Without any guidance from authorizing legislation or proposed Treasury regulations, investors, local policymakers and stakeholders are asking which Opportunity Zones have the greatest potential to create vibrant, inclusive walkable communities. What people-centered place-based policy framework is needed to ensure Opportunity Fund investments lead to the creation of more walkable places that are healthy, prosperous, and resilient? …
This study creates a “Smart Growth Potential” filter for investors to identify which Opportunity Zones should be prioritized for investment from a triple-bottom-line perspective that can deliver positive economic, environmental, and social returns. Additionally, this study is intended to provide local policymakers and community groups with a policy framework to manage and ensure equitable, inclusive development in Opportunity Zones.
The Ranking System
The Ranking Report determined the ranking of each Opportunity Zone by calculating its Smart Growth Potential (SGP) and its Social Equity + Vulnerability Index score (SEVI).
SGP is based on four metrics: (1) walkability; (2) job density; (3) housing diversity; and (4) distance to the nearest Top 100 central business district. This generated a final score from 0 to 20. Opportunity Zones needed a minimum score of 10 to be a SGP Opportunity Zone.
SEVI is also based on four factors: (1) transit accessibility; (2) housing and transportation affordability; (3) diversity of housing tenure; and (4) social vulnerability index. This also generated a final score from 0 to 20. Opportunity Zones needed a minimum score of 10 to be a SEVI Opportunity Zone.
The article highlighted several key findings of the Rankings Report:
The research revealed several interesting findings:
- 98% of the designated Opportunity Zones scored less than the minimum score of 10 to be determined a Smart Growth Potential (SGP) Opportunity Zone. Only 2% of the Opportunity Zones scored 10 or higher, representing less than 700,000 people who currently live in Opportunity Zones that are walkable urban places with smart growth investment potential.
- While 13% of Opportunity Zones with Smart Growth Potential with scores less than 10 are rural, the vast majority of Opportunity Zones with limited smart growth investment potential are in small towns, suburbs, and urban areas. For these communities, aggressive federal, state and local policies are needed to retrofit auto-oriented urban form and revitalize rural town centers into the vibrant and inclusive communities that Americans are demanding.
- Among the top 30 metros, New York, Los Angeles, Philadelphia, and Chicago earn the top scores for Opportunity Zones with the most smart growth potential. Charlotte, San Antonio, Orlando, and Dallas received the lowest scores for smart growth investment potential.
- At the state level, New York, California, New Jersey, Maryland, Pennsylvania, and Ohio ranked highest with the greatest share of the top scoring Opportunity Zones.
- While the New York City metro area dominated across all product types (office, retail, multi-family) for the highest asking rents, unexpected metro areas made it into the top 10 opportunity zones by product type:
- Office: Downtown Oakland (Ranked #3) and Downtown Sacramento (Ranked #8)
- Retail: Kansas City, MO (Ranked #6) and Silver Spring, MD (Ranked #8)
- Multifamily: Cleveland, OH (Campus District) (Ranked #2) and Downtown Houston (Ranked #9)
Download Link for National Opportunity Zones Ranking Report (December 2018)