Opportunity Zones Enter Second Phase With Minimal Oversight of Beneficiaries
Miami’s Design District, a 30-acre luxury retail corridor where shoppers carry Dior bags past valet lines of Ferraris, qualifies again for federal Opportunity Zone tax breaks when the program’s second phase begins next year. Congress created Opportunity Zones in 2017 to attract investment in lower-income areas by allowing investors to defer or eliminate certain capital-gains taxes. The Design District qualified because census-takers group the retail hub with adjacent lower-income neighborhoods including Little Haiti and Buena Vista. Because the district has no residences, census income calculations rely solely on residential data from the poorer tract perimeters.
Developer Craig Robins, who began transforming the Design District from a depressed area in the 1990s, said he and his partners—L Catterton, backed by LVMH chief Bernard Arnault, and Brookfield—do not pursue the tax breaks directly because they acquired central parcels before 2017. Robins said the designation attracted hundreds of millions of dollars from outside investors to the area, driving land values up and potentially generating hundreds of millions in untaxed profits for owners of qualifying properties. Several major projects underway could qualify for breaks, including a Fouquet’s hotel and a 20-story office tower called Ursa. Census data shows the tract’s residential base remains largely lower-income, raising questions about whether investment reached existing communities.
The program has drawn criticism for lacking public reporting requirements, making tax breaks hard to trace. Brett Theodos of the Urban Institute said Opportunity Zones function as subsidies for high-net-worth investors to make deals they would pursue regardless of incentives. The program’s reliance on census income data up to six years old means designations may not reflect current neighborhood conditions. John Lettieri, whose Economic Innovation Group conceived the program, said governors bear responsibility for selecting appropriate locations despite imperfect data.
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