As the contours of the new administration’s federal housing policy emerge, Opportunity Zones (OZ) are receiving significant attention as a core pillar of what might come next in housing and economic development.
Given the likelihood that OZs could be extended and expanded in the 2025 tax bill, there is substantial interest in lessons learned from places that were able to take full advantage of the tax incentive in purposeful ways, by smartly leveraging public, private and philanthropic investments since its inception in 2017.
Opportunity Alabama (OPAL) is a best-in-class model demonstrating how states and communities can mobilize local corporations, high-net-worth individuals, universities, hospitals, foundations, and government agencies to coordinate efforts, invest at scale, and attract outside capital. OPAL serves as the critical intermediary making it all possible.
The results are impressive: Alabama ranks in the top ten nationally in the aggregate (not just per capita) in the level of OZ investment; a dramatic change from where Alabama typically finds itself on national ranking lists and a testament to the state getting ahead of this incentive early and aggressively.
As in other communities, housing production represents a major focus of OPAL. In Birmingham’s downtown, for example, Market Lofts is bringing 192 units of workforce housing without other forms of subsidy to serve residents who make too much income to qualify for subsidized housing but too little to afford much of the available residential housing in the city center. The project has revitalized a 140,000 square foot historic building vacant since the American Red Cross left in 1998.
Alabama’s success offers a blueprint for what’s possible when innovative thinking meets strategic execution. As OZs stand on the brink of legislative extension and enhancement, lessons from Opportunity Alabama provide relevant guidance for states seeking to leverage this program to bring in unprecedented capital while creating the infrastructure for sustained inclusive growth.
The Challenge This Tool Solves
Private capital that utilizes public incentives, such as those with OZs, may not provide what the public needs or wants. Additionally, private capital is often siloed, with investors, financial institutions, and philanthropy operating with their own set of criteria, timelines, and objectives. By creating an intermediary to organize and pool private capital, while at the same time preparing and strengthening projects for that capital to invest in, Opportunity Alabama brings together investors and those who need investment toward a better coordinated and higher impact approach.
Types of Communities That Could Use This Tool
States and localities of all sizes and capacity levels can utilize an intermediary and governance model like Opportunity Alabama. However, its effectiveness requires understanding and plugging current capacity gaps in the ecosystem while strengthening existing organizations toward the goal of better coordinated capital. In some communities a new intermediary may be the answer, and in others, empowering and restructuring an existing group may be more expeditious.
Expected Impacts of This Tool
Organizing capital, providing technical assistance to entities to receive investment, and strengthening the CDFI and investment ecosystem in a community can create a flywheel effect for positive impact. While the OZs program was the catalyst to OPAL’s creation, communities can use other catalysts, such as the creation of a new housing trust fund or investment program, to organize the community towards coordinated impact.