Here’s Another Way Opportunity Zones Can Boost Neighborhood Development

In addition to his job as a tax advisor, Blake Christian also is part of a venture that converts shipping containers into housing.

But because of his primary job as a senior tax partner at HCVT LLP, Christian knows the business is a good fit for Opportunity Zones.

“I went through the process of renting space in Salt Lake City to put a manufacturing facility to build those shipping container homes,” Christian says. “We’ve already been doing this, but now we concentrated it in an Opportunity Zone.”

For a company in need of capital, locating in an Opportunity Zone was a no-brainer for Christian. “It’s a lot easier to raise funds for that business from investors because you’re selling them on the tax-free gain to 10 years and the deferral in between,” he says. “It’s a win-win for everybody if the cities are bending over backward to help you do all those.”

Christian thinks locating in Opportunity Zones offers advantages for firms outside of manufacturing, though the warehouse space in these areas makes those businesses a good fit. Tech is another good fit, for instance.

“The perfect way to use this program on the landlord side is to develop incubator space for small businesses,” Christian says. “Think about a tech company. It’s really easy to start or move a tech company or biotech company into an Opportunity Zone. You could plow more money into it. Ten years down the road, you’ve got a tax-free gain. I’m working with landlords and different cities and counties to develop that stuff.” 

The Opportunity Zone program can be a powerful tool to help build a business, according to Christian.

 “A lot of people don’t realize it, but the most powerful way to use the program to me is not on a real estate project, but on an operating business,” Christian says. “Probably one-third of my projects are operating businesses either being formed or moving them back into an Opportunity Zone.”

Also, locating firms in Opportunity Zones can boost occupancy for office and warehouse landlords. And, if workers relocate to the area, it can also help apartment owners. Landlords are helping market the potential of the program as well.

With the current focus on Biden’s Infrastructure bill, Christian says the Opportunity Zone program can also be a perfect complement for long-term projects that happen to fall into one of the 8,764 census tracts.

The Biden Administration is also focused on utilizing the OZ program more effectively with low-income housing projects to improve the housing shortage.

“Bipartisan legislation was introduced earlier this year to potentially push out the OZ gain recognition date from December 31, 2026, to 2028, which would also decrease the gain recognition amount from 90% to 85% as a result of the 10% and 15% tax basis bumps after holding the OZ funds for five and seven years, respectively,” Christian says.