Can Opportunity Zones Fund the Next Black Wall Street Part 3
Are Opportunity Zones Good or Bad for Us?
In Part 1 and 2 we discussed the basics of Opportunity Zones and how you can benefit. In this post we want to take a more macro, large picture, view of how this policy can impact the Black community specifically. In this post we will discuss the possibility of gentrification, the requirement of capital gains, job opportunities, and the quickly approaching 2026 deadline for the OZ policy. This will be a quick view of the macro, there are tons of other impacts we can look at but hopefully this gets you all thinking.
As always for the folks that don't want to read we have a video for you!
Will they Increase Gentrification?
A common concern about the new Opportunity Zone policy is the potential for increased rates of gentrification. First lets make sure we are on the same page for definitions. Gentrification at a basic level is improving the living conditions and aesthetics of a neighborhood or community. Gentrification is not always a bad thing.
There is internal gentrification which is typically called beautification, this is when the local community invests in itself to make the community better. Then there is external gentrification, which is when folks from outside of the community come in and typically push locals out. That is the bad one.
This new policy will without a doubt increase external gentrification. The way the policy is set up, low income neighborhoods have become Opportunity Zones for people with capital gains to receive a tax deferment. Typically low income communities do not have large amounts of capital gains to invest so it won’t be them investing in their communities. Instead it will be wealthy individuals or companies.
Now there are some folks that come from these communities who will be reinvesting (Killer Mike, TI, Nipsey Hussle RIP, Jay Z, Kanye West, Russel Westbrook). There are plenty of wealthy individuals from our communities that now have the opportunity to reinvest in the Black Community to defer taxes and to support their folks. Unfortunately the mass majority of dollars pouring into OZ will be external but the projects that we see that are internal should be fully supported!
Will they Increase the Wealth Gap?
The power of the OZ policy comes with the ability to defer or eliminate an individual's capital gains taxes. If you want to learn more about capital gains check out our first post in the series. Capitals gains general comes from selling assets (real estate, stocks, collectible items, etc).
To me this translates to wealth, individuals who have had the privilege to accumulate wealth have the opportunity to create more wealth. The problem with this is while the working class and middle class will be paying 20%-35% taxes on their taxable income (salary/wage), the wealthy will be getting a tax reduction. This in the long run will widen the wealth gap.
The best way to combat the widening of the wealth gap specifically for the Black community would be for affordable housing and education projections to become the priority for folks in our community with the money to invest. If we can lower the housing costs in these expensive urban cities and give high quality education options for our youth that focus on financial literacy, cooperative economics, and technology we could stand a chance. One of the many motivations for creating Black Wall Street The Board Game, finances must become a part of our everyday mindset.
We have enough wealth in our community and among our elite to commit to housing and education, the return on investment won’t be high in the short term but could return exponential returns in the long run. This policy could be the policy needed to reinvest private capital into our communities surrounding urban centers and HBCUs.
Job and Economic Opportunities
To me, there are multiple layers of economics opportunity with this new policy. The first layer which has the most potential profit is the capital gains investing. These are the individuals or groups that will be investing their money into Opportunity Zones. The next layer will be the jobs created; construction, contracting, property management, arena staff etc. There will definitely be a surge of hourly jobs created that will help local young folks and working class folks. These are great short term opportunities but they may not be the best options for our community long term.
Another layer, our favorite layer, is the ability to create businesses that will be supported by this influx in population. With Opportunity Zones bringing in more residential property and partially gentrifying areas, there will be an increase in population and money in these communities. This can have a positive impact on community owned restaurants, gas stations, clothing stores, day cares, cleaning services, etc. Creating marketable and scalable businesses now can prepare you to take advantage of this opportunity later.
For Example, Inglewood California is getting a new Rams Stadium and a New Clippers Stadium. Foot traffic will be incredible! To take advantage of this traffic community members should open parking lots, game lounges, restaurants, day care facilities, apparel stores, and others businesses that will cater to the needs of the consumers. This will mirror the tourism economy. Although some of us may not have capital gains we can still capitalize on this moment.
There are many more layers we can analyze to see if opportunity zones will benefit or hurt our community. It all comes down to preparation and planning. Opportunity Zones will benefit those that prepare to take advantage of them the most.
It is easiest to benefit from this new policy if you have capital gains but it is still possible for you to profit without capital gains. The best way for us to come out ahead in this situation is to have our wealthy focus on education and housing and to have the masses focused on how they can create scalable businesses.
Please also understand cooperative economics will be our friend. Pooling resources together to buy assets or start businesses will yield higher results then trying to create solo ventures.
We Will Rebuild.