Securing Lasting Community Impact Through Opportunity Zones

HR&A’s Guiding Principles for Investment


Opportunity Zones are part of a new federal initiative to direct much-needed capital to low-income communities by allowing investors to defer and reduce capital gains taxes by reinvesting gains. To participate, an investor can direct capital gains to businesses and properties located within nearly 8,700 designated census tracts.
For investors, this program allows them to reduce their taxable basis on their original gains and forgo taxes on gains from new investments (with benefits increasing the longer the investment is held). For cities, developers, and businesses, this opens up a potentially significant source of equity capital to stimulate growth in low-income and historically disinvested communities. This program has the potential to be a game-changer in steering a portion of approximately $6 trillion in unrealized capital gains to communities that need quality jobs, safe and affordable housing, and amenities for their residents.


Since the announcement of Opportunity Zone designations earlier this spring, potential investors, project sponsors, and policymakers have awaited clarification from the federal government about how to leverage this new tool and to understand the potential impact on local communities. The federal government will release additional guidance as soon as late October, which is expected to address questions on project eligibility, registration requirements, and the timeline of when capital must be deployed. This guidance is important both because many communities are eager to attract Opportunity Fund capital to jumpstart long-planned projects, and because still other communities are concerned that concentrated investment in certain distressed communities could exacerbate the risks of displacement.


Over the past six months, we’ve spoken with clients and colleagues interested in Opportunity Zones to develop a set of principles for investors, funds, cities, and neighborhoods. These guiding principles are meant to help direct and attract investments in a manner that strengthens local economies and promotes community-serving growth to achieve the promised impact of Opportunity Zones.


Guiding Principles for Opportunity Zone Investment:


  1. Deploy capital to realize competitive returns and tangible community benefits. Opportunity Zones were designed not merely as a tax benefit but as a means of spurring economic growth and opportunity in communities that have struggled to attract capital. Investors should perform rigorous market analyses to understand the local development and community contexts, and partner with cities and local stakeholders to balance investor objectives with comprehensive, community-based strategies.

  3. Link Opportunity Zone investments to human capital and small business growth strategies. Align investments to provide benefits to low-income residents and local businesses, and to help mitigate displacement pressures. Where possible, business and employment opportunities created by investments should be accessible to, and promoted among, local businesses and residents through established channels and partnerships.

  5. Combine Opportunity Zone investments with other incentives to maximize impact and stretch public dollars. Such incentives could include New Markets Tax Credits, Low-Income Housing Tax Credits, Historic Tax Credits, Brownfield Opportunity Area funds, Community Development Block Grants, HOME funds, and property tax abatements. States and cities should also reassess existing economic development incentives to maximize public benefits in light of capital available through Opportunity Funds. States should also consider whether to align their tax treatment of capital gains with federal tax law.

  7. Favor investments that support sustainable, equitable, and community-serving economic growth. Opportunity Funds should avoid investing in projects that reduce the supply of affordable housing, displace important cultural or civic assets, or worsen environmental quality. Cities should reexamine land use, tax, and other regulations to encourage or fast-track investments that achieve public policy goals, and to discourage investments that would undermine local goals.

  9. Prioritize accountability through transparent reporting. The next round of federal guidelines is unlikely to require detailed impact reporting, but investors still have the option to self-report and hold themselves to meaningful standards. Outcomes should detail benefits such as the number of new living-wage jobs created, affordable housing units constructed, and increases in incomes (per capita and household).



As we await further guidance from Washington, cities and development districts have begun to outline investment opportunities and community goals; investors have begun to catalog opportunities and outline their investment goals; and foundations have defined conditions for matching investments. We encourage interested parties to apply these and other principles to position themselves for impactful investment. Just like pending regulations, these actions will help to define the early successes and long-term impact of this potentially transformative new program.


Have more questions about Opportunity Zones or Funds? For more information, contact Eric Rothman or Bret Collazzi in HR&A’s New York office or Paul Silvern in HR&A’s Los Angeles office.