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The opportunity zone tax incentive and qualified opportunity funds could be a “game changer” for workforce or affordable housing development, according to Scott Choppin of Urban Pacific Group of Cos. Urban Pacific is currently building multi-generational urban townhomes in blue collar communities, and he has seen significant early success. The opportunity zone incentive is part of the recent tax reform package and is intended to encourage investment in distressed markets. Choppin’s townhouses are already located in the designated opportunity zone markets, and will be integral in building larger communities that he can hold for the long-term.

“The new opportunity zone tax structure and the qualified opportunity funds, to me, will be a game changer for this business plan,” Choppin, founder of Urban Pacific, tells GlobeSt.com. “We are already building these projects in qualified opportunity zones, so all three of the active projects that we have right now and the fourth project that we have in the pipeline are all in qualified census tracks. The opportunity zone funds will give us the opportunity to do bigger projects and hold them in the long term. The funds will also give us the capability to control the rental rates better than we are able to now.”

The opportunity zone incentive allows for deferral of capital gains taxes if the taxpayer invests capital proceeds into a qualified opportunity fund that will invest in low-income areas. The incentive is also not beholden to the rent restrictions attached to affordable housing tax programs. “Additionally, the incentive doesn’t have covenants like affordable housing tax credits,” says Choppin. “The Opportunity Zones don’t have covenants, like normal affordable projects do. So, for example, we won’t have to restrict rents for 55 years at a pre-specified level. From a social impact perspective and in terms of our own company standards, we want to hold more of these—frankly as many as we can.”

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.

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