Siri Hibbler left her native Garfield Park for California in 1986 to pursue a career in corporate America. When she came back three decades later, the neighborhood she grew up in was unrecognizable to her.
What were once rows of single-family homes and greystones were replaced with vacant lots, and much of the neighborhood’s commercial district along Madison Street had been hollowed out, the 55-year-old said.
Hibbler set up the Garfield Park Chamber of Commerce in 2016 to help revitalize the community she loves through economic development.
The federal Opportunity Zones tax credit, stuffed in the middle of last year’s Tax Cuts and Jobs Act, is supposed to help people like Hibbler bring blighted communities back to life.
Its goal is to motivate investors and real estate developers to build housing, commercial and industrial projects in impoverished and underdeveloped areas — “Opportunity Zones” — by providing tax breaks on their capital gains.
There are 135 Opportunity Zones in Chicago spread across the South and West sides. The zones encompass neighborhoods like Austin, Chatham and Garfield Park.
Hibbler’s heard about the Opportunity Zones but that’s about it.
“No one even knows how it works,” Hibbler said. “The fear residents have is that big developers are going to come into the neighborhood because it’s an Opportunity Zone and they are going to wake up one day with all the land sold to these people.”
A report released Thursday by the Urban Institute, a nonpartisan think tank, outlines how Chicago can best leverage the Opportunity Zones tax credit to everyone’s benefit — developers, investors, and, most importantly, long-standing community residents.
“Only careful and coordinated community action around Opportunity Zones can ensure that the residents meant to benefit from upgraded neighborhood services and better access to employment are not simply displaced to other disinvested areas,” the report states.
Some 85 percent of residents in Chicago zones are black and 10 percent are Hispanic, according to the report. The median household income is just over $26,000 and the median home value is $140,000. Nearly 23 percent of the housing stock is vacant and more than a third of households are severely rent burdened.
Anyone who invests in an Opportunity Zone can defer taxes on their investment until the end of 2026 or when they sell their investment, whichever comes first. Capital gains invested zone developments are tax-exempt if they’re held for at least 10 years.
The report recommends city officials should:
- Partner with community stakeholders in determining what kinds of development are needed in their neighborhoods
- Preserve affordable housing in zones by identifying neighborhoods most likely to gentrify
- Layer Opportunity Zone projects with local tax incentives like tax increment financing
- Add reporting obligations from businesses receiving investments and who is doing the investing in an Opportunity Zone
- Sell city-owned vacant land in Opportunity Zones only to investors “willing to meet specific community needs”
Unlike in other major cities like New York and Los Angeles, Chicago zones do not overlap with neighborhoods gentrifying at a fast rate, said Brett Theodos, a research associate at the Urban Institute and lead author of the report.
That means certain investors might ignore several neighborhoods despite them being inside an Opportunity Zone.
“Chicago really picked zones that were not at the brink of gentrification,” Theodos said. “Nationally, most of the money will go to gentrifying zones, but Chicago might have the opposite problem.”
Several Chicago investors are rushing to invest in zone projects nationwide. Most notably, real estate heavyweight Larry Levy and private equity investors Avy Stein and Eric Becker of Cresset Capital Management announced in October they’re looking to raise $500 million for zone projects.
For U.S. Rep. Danny Davis, D-Chicago, whose district includes Garfield Park, said the zone tax credit is “manna from heaven.”
“I’m very interested in these zones, and I actually think they are going to be helpful in redeveloping depressed areas especially in inner-city urban areas,” Davis said. “A lot of my time, energy and effort is going to spend on trying to make use of these zones to redevelop real portions of my congressional district.”
But some stakeholders in Opportunity Zone neighborhoods have little idea of how they work.
Ald. Walter Burnett, Jr. (27th), who has four Opportunity Zones in his ward, said federal officials haven’t done enough to explain how the program works.
Burnett is being approached by investors with questions about the zones, but he hasn’t been able to answer them with confidence.
“I mostly have been hearing about Opportunity Zones from developers, and I haven’t really heard it from any administration,” Burnett said. “I am trying to get details so I can learn how to leverage and use it the best way in my ward.”
Burnett said his staff is working to learn more as well as schedule a meeting with Chicago’s Department of Planning and Development for a briefing.
“We need to have someone come and explain it to us,” Burnett said.
The Urban Institute will host a panel discussion of the report at Malcolm X College from 1:30 to 4:30 p.m. on Jan. 17.
Carlos Ballesteros and Manny Ramos are corps members in Report for America, a not-for-profit journalism program that aims to bolster Sun-Times coverage of issues affecting Chicago’s South and West sides.