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Opportunity Zones Explained: HappyCo
Covers Fine Print through Recent Projects

Industry Insights

What is an “opportunity zone,” exactly? HappyCo offers a comprehensive look at this distinctive housing program — from policy guidelines to compelling projects getting off the ground right now.

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If you turn to the official IRS.gov website for answers, the definition of an “opportunity zone” falls a little short of inspiring: “an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.” However, when you research recent opportunity zone proposals, it’s hard to suppress a sense of optimism. Take, for example, an Atlanta development designed to feature “retail, residential, cultural, and office” spaces, in addition to “a public green-space component and a MARTA station a block away.”

Importantly, the Curbed writer covering this $400-million, 12.5-acre Atlanta-based proposal strikes at a tricky — but truly rewarding — equation at the heart of opportunity zones. Josh Green notes: “the goal is to walk the tightrope between a major development that does more to enhance the community than displace it, while delivering favorable returns to investors.”

Covering the fine print through recent developments, HappyCo explores the rules, risks, and possibilities of the opportunity zone program — giving multifamily operators the tools they need to act.

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Diving into definitions: the fine print on opportunity zones.

green path


For a sense of history, the opportunity zone program was established at the end of 2017, passed as part of President Donald Trump’s Tax Cuts and Jobs Acts Bill. Bisnow provides a tight summary of how multifamily investors enter the equation. Writer Joseph Pimentel explains: “the opportunity zones program allows an investor to roll over capital gains from the sale of an asset to a special qualified opportunity zone fund.”

From there, Pimentel of Bisnow adds: “that fund then becomes the investment vehicle for a real estate or business investment” across one of 8,700 areas nationwide defined as “distressed or low-income.” What do investors face at the end of this road? “A hefty tax incentive,” in Pimental’s words.

Fortunately, IRS.gov sets the context and breaks down the math, noting that investors can: “defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026.” The longer an investor holds the QOF, the greater the benefit, tax-wise. Indeed, as the IRS notes: “if the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain.” Should the investment be held for more than seven years, that exclusion jumps to 15-percent.

structure being built


Better still, the IRS site confirms that a multifamily developer “can get the tax benefits, even if you don’t live, work or have a business in an opportunity zone.” Even more promising: an NAA piece on opportunity zones notes that multifamily developers have the option to join forces and magnify their efforts right out of the gate. Writer Larry Curtis explains that developers can work together through a fund (perhaps organized through an investment bank) in which “they pool their gain with the gains of others in order to invest in a variety of projects in a variety of locations.”

Naturally, NAA advises multifamily developers to invest “such gains in developments that have the best potential for value growth, enabling the delayed gain to enjoy substantial tax-free returns.” However, it’s important to understand the meaningful mission behind opportunity zones — so that multifamily operators think too of the ways they can empower low-income communities across the country.

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From mission and criticism to encouraging ripple effects.

balcony view

Above all, the IRS site makes clear: “opportunity zones are an economic development tool — that is, they are designed to spur economic development and job creation in distressed communities.” NAA takes this sentiment a step further, describing the program as “an enormous opportunity to realize important public policy goals for stimulating investment in much-needed housing in underserved markets, particularly in reviving stalled projects that have already been entitled.”

GlobeSt writer Tanya Sterling provides important context, noting: “the majority of residents in opportunity zones have below-average household incomes, low high school graduation rates and too few are gainfully employed.” With this in mind, she turns to Boston-area law firm partner John W. Gahan, “who believes that with an increase in wages and jobs plus an investment in a community’s infrastructure, opportunity zones and investors alike would benefit.”

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Still, any promising housing initiative is bound to face worthwhile critiques. To this end, NAA offers multifamily operators this cautionary message: “it should be emphasized that the otherwise taxable gain needs to be invested within six months of realization.” Thus, NAA recommends “shovel-ready projects to invest in — not projects just beginning a potentially arduous design or permitting process.” Relatedly, NAA contributing writer Larry Curtis of WinnDevelopment maintains: while the opportunity zone program represents an “exciting incentive,” it is “not a magic wand that causes age-old real estate fundamentals to instantly disappear.”

As for the program’s potential to revitalize low-income communities, Bisnow notes that its critics fear: “certain investments could lead to gentrification and displacement of longtime and minority residents.” Yet, there’s a strong indication that various legislators are working to ensure opportunity zones live up to their promise. For example, Bisnow reveals that, in November 2019, Sen. Ron Wyden (D-OR) introduced a bill “to require a reporting element and eliminate 200 opportunity zones deemed not low-income.”

smiling kid


To further ensure that the program lives up to purpose (and to encourage increased participation), the IRS and Treasury Department acted in 2019 to adjust opportunity zone policy in a critical way. Now, the rules “allow an opportunity zone investor to aggregate certain buildings on the same parcel as a single property, as long as it is in the same opportunity zone fund and it shares certain facilities and business elements.”

Finally, some leaders in real estate argue that the opportunity zone program inspires a valuable sense of continuity in property management. On this front, The Real Deal cites Larry Bond of Bond Companies, who stresses: “‘it encourages stability in real estate, because you get a tax break by holding onto the project.”

With these intentions and critiques in mind, it’s valuable for operators to get a sense of proposals and projects getting off the ground right now.

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Ripe with possibilities: highlighting opportunity zone projects.

apartment towers

First off, it’s important to stress: the latest opportunity zone projects earning media coverage are far from small in scope. The Real Deal reported earlier in January: “a developer broke ground last week on L.A.’s first project to take advantage of the Opportunity Zone program,” a site standing eight stories with 200 units and expected cost of approximately $100 million.

Meanwhile in Orlando, Yahoo! Finance reports that Canyon Real Estate Partners and Fore Property are joining forces to develop 19 South, an opportunity zone proposal set to include 384 units. The site certainly seems designed with millennial tastes in mind, featuring “Bluetooth entry throughout the property…coworking space, and a lakeside fitness track” — in addition to its close proximity to public transit. With construction set to begin in March of this year, a rep from Fore Property made clear to the press that his team is excited to deliver on the opportunity zone promise, providing a “high-quality option to the area as it continues to undergo strong economic development.”

kids playing


In the realm of affordable opportunity zone projects, let’s turn back to the Atlanta proposal by Elevate City Partners mentioned earlier in this piece. As Curbed notes, the proposed 12.5-acre site designed to replace an “aging mall” has already earned support from the city’s Invest Atlanta development branch, which offered “a $2 million predevelopment loan — with affordable housing requirements that would apply to future housing.”

Along these same lines, the project’s developers say they’re “planning a $15 million economic development fund to alleviate displacement and support minority-owned businesses.” Waging the redeveloped mall is set to attract Silicon Valley tech partners and entertainment company interest, developer Ryan Gravel stresses: “it will be a beacon of…freshly graduated talent for global companies that are seeking a diverse workforce.” Indeed, Invest Atlanta CEO Dr. Eloisa Klementich suggests the site will go a long way in facilitating “equitable investment in the Southside” bound to spur “access to jobs and affordable housing.”

Similarly, Pinnacle Partners has kicked off Seattle’s first opportunity zone with below-market-rate prices in mind. As GlobeSt reports, “the $30 million apartment building…will feature 80 units with transit accessibility and provide affordable one-bedroom studios.” As Pinnacle Managing Partner Jeff Feinstein puts it, “I think that this project…exemplifies the spirit of the OZ program” by ”developing O-Zones in need of affordable housing, community impact and job creation.”

Indeed, Boston lawyer John Gahan believes opportunity zones offer operators a promising avenue to revitalize low-income communities. Importantly, Gahan tells GlobeSt this financing option enables affordable operators to: “open up community rooms, host job fairs, conduct workforce training, buildout a child care center, and generally find ways to give back to the community.”


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Manage opportunity zone projects seamlessly – with Happy Tasks!

Happy Tasks integrates with the key multifamily work order systems — MRI, RealPage, ResMan, Yardi and more — giving you one unified interface to manage all your work orders. It also works seamlessly with Happy Inspector, so you can generate a task from a single tap on an inspection. And Happy Tasks goes beyond work orders, for a total project management solution for your apartments — from make ready to transitions and renovations.

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About the author

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Glennis Markison
Content & Webinar Producer

Glennis is a writer/producer from San Francisco. Taking the city’s trains and buses with riders of all ages and backgrounds inspired Glennis to go into journalism and share people’s stories for a living. After graduating from Johns Hopkins University in 2013, she worked at CBS San Francisco as a program coordinator, public affairs producer, and ultimately full-time news writer for the KPIX 5 Morning News. She’s excited to enter the bustling startup world and tell HappyCo’s stories across channels.

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