President Trump signed an Executive Order on Wednesday creating the White House Opportunity and Revitalization Council. Housing and Urban Development Secretary Ben Carson will chair the new council which aims to coordinate federal agencies’ efforts to revitalize low-income communities through Opportunity Zones.
Following the meeting, Secretary Carson spoke with Townhall about what the new Council hopes to accomplish. He also addressed questions and concerns that have arisen regarding the opportunity zones program.
Opportunity zones were created as part of the Tax Cut and Jobs Act passed in December of 2017. They offer special tax breaks to companies that invest in the roughly 8,700 low-income zones that state officials have designated.
“The concept is how do you get people to invest into the economically depressed areas for which there is little incentive for them to invest,” Secretary Carson explained, “basically what it does is it permits people to take unrealized capital gains and invest them into an Opportunity Fund in an opportunity zone and if that is a long-term investment they can realize some substantial tax advantages.”
Carson outlined some of the tax benefits these investors would realize.
“If it stays there for five years then of course they get a five-year delay in the time that they have to pay the capital gains, in addition to that they get a ten percent reduction in the amount of capital gains they have to pay,” he explained. “If they leave it in an additional two years for a total of seven it’s up to 15 percent, and if they leave it in for a full ten years or more then you pay nothing on the gain from the investment.”
He said that the key is to get long term investments in these areas because, in the past, programs would attract short term investments but the idea with the opportunity zones is that “you’re in it for the long haul.”
Carson also discussed the need for the 13-agency council President Trump authorized Wednesday that will oversee the opportunity zones.
“Even though all the different agencies have nice programs, they frequently worked at cross purposes,” he explained, “so by convening this council, meeting on a regular basis, and amalgamating the tools that we have, we’ll be able to focus them on specific problems and make our reactions considerably more effective and more efficient.”
Carson said that one of the new council’s first orders of business on the opportunity zones will be to “come up with the appropriate metrics to make sure that all the information we gather is not only reproducible but can be applied to other places.”
“We’re going to obviously want to look at the local economic impact an opportunity zone area versus a non-area in the same vicinity,” he said.
Secretary Carson went on to address some concerns that have been raised by critics that some of the areas designated as opportunity zones are gentrifying and not technically economically disadvantaged.
“It’s going to be different in every locality, it’s going to be different in the rural areas than in the urban areas and different in the suburban areas,” Carson argued, adding “some of the areas that I’ve seen are pretty horrible.”
“That’s one of the reasons that we allow the governors in the states to be the ones that choose the opportunity zones,” he explained, “because they along with all of their local people know what the needs are in their state and where they’re likely to get the biggest bang for their buck.”
Sen. Cory Booker (D-NJ), who wrote the original bill with Sen. Tim Scott (R-SC), recently called for annual data collection on the program as well as transparency and reporting requirements that were in the original, underlying legislation.
Carson says that’s something that they’re looking at “at least annually.”
As for the program’s transparency, he emphasized that “we’re not going to be interested in hiding anything from anybody because we recognize that like any new program it’s going to evolve and the only way that it can evolve appropriately is by listening to the impact it’s had on people, what their concerns are, what their recommendations are.”
Carson also addressed widespread reporting that raised concerns over senior White House advisor Jared Kushner's stake in the real estate investment firm Cadre which is launching a series of opportunity zone funds.
“The fact of the matter is all the opportunity zones are chosen by the respective governors,” he said. “No other private entity has anything to say about that whatsoever but of course there will be many private entities that have properties in opportunity zones.”
“Anybody who has lots of property probably has some in an opportunity zone and as that opportunity zone is enhanced by the economic activity going around, the value of their investment will increase,” he continued, “unless you’re going to say anybody who belongs to a certain family or a certain party cannot participate in the tide that raises all boats, I’m not exactly sure how you fix that.”
Overall, Carson has high hopes for the program, including how it will create new jobs in these impoverished areas.
“In the process of rehabilitating all of these areas a lot of jobs are going to be created and that’s one of the reasons that we’re going to be coming out with new rules on Section 3 very shortly,” he said.
“Section 3 of the Fair Housing Act requires that you hire, train, or give contracts to low-income people in the area that grant has been given,” he explained, “we’re just going to make it much easier to use Section 3 and that’s the kind of thing that will help people gain the kind of skills that will allow them to become self-sufficient.”
“Ultimately that’s the point in all of this, recognizing that a responsible government should be looking at how do you empower your citizens,” Carson concluded, “because if you have more empowered citizens you have a more empowered country.”