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Opportunity Zones Aren’t Enough To Fuel A Bigger Boston Development Boom


Massachusetts may have 138 areas designated as opportunity zones, but regional real estate experts aren’t banking on them being the only tax incentive needed to move projects forward in the new year.

Perkins + Will principal and Managing Director Robert Brown, Normandy Realty founder Jeff Gronning and Federal Realty Investment Trust Vice President Bryan Furze

“This is a tool in the toolkit, but you’re not going to get very far with just that tool,” Federal Realty Investment Trust Vice President Bryan Furze said. 

While developers are still figuring out how to proceed with opportunity zones and the new tax code, Massachusetts commercial real estate players aren’t expecting a huge development boom to accompany the program’s rollout in their state. Programs like a $1.8B affordable housing bill signed by Massachusetts Gov. Charlie Baker and the Low Income Housing Tax Credit are easier to navigate, and Furze notes not all opportunity zones are the same. 

“Thirty percent of them are in very-low-income areas, and I don’t know if opportunity zones alone are enough to fuel an economic return,” he said. 

CoStar Quantitative Analyst Mark Hickey

Massachusetts leaders identified 550 census tracts deemed low-income that would likely qualify for the Opportunity Zone program, a tax incentive created by the 2017 Tax Cuts and Jobs Act. The state's 138 opportunity zones signed off by the federal government enable a developer to defer, and even be exempt, from capital gains taxes depending on how long they hold onto an asset. 

Furze and others at Bisnow’s Boston 2019 Forecast and The Future of Opportunity Zones event Tuesday still expect the program to combine with other economic tools to enable projects to pencil out. 

CoStar Market Analyst Peter Conway

“It will be essential to combine programs that already existed with opportunity zones so that we don’t end up with just white papers about how great it would be to have more housing,” Winn Cos. President Larry Curtis said. “This could actually create the middle-income, workforce housing that will keep the engine of the state going.”

The Opportunity Zone program comes with little oversight, and it bundles well with other programs, except for a 1031 exchange, Saul Ewing Arnstein & Lehr partner Sally Michael said. That is good news in Massachusetts, which is facing a housing shortage and requires a variety of tax incentives to offset high construction costs to make middle-income housing work financially for developers. 

Addressing the common critique that there are too many luxury multifamily developments under construction, Curtis said that stems from the high cost of construction.

Bernkopf Goodman partner Peter McGlynn, Spaulding & Slye Investments Managing Director Daniel St. Clair, incoming Massachusetts Secretary of Housing and Economic Development Michael Kennealy, Colliers International co-Chairman Kevin Phelan and U.S. Bank Senior Vice President John Roach

It costs developers in the ballpark of $400K to build a single residential unit in Boston, and that requires a rent of $4K per month to recoup development costs. Considering someone who makes $80K annually would only be able to afford $2K each month without being rent-burdened, incentive plans like historic tax credits, Low Income Housing Tax Credits and now opportunity zones are the only current way to try to close the gap, Curtis said.

“There’s a further disconnect when you go to communities like Fall River, where the market rent may be more like $1,200 or $1,500,” he said.

Federal Realty Investment Trust Vice President Bryan Furze, Winn Cos. President Larry Curtis, Hackett Feinberg partner Kimberly Martin-Epstein and Saul Ewing Arnstein & Lehr partner Sally Michael

While panelists Tuesday didn’t expect opportunity zones to stand on their own as development tool, they do see them playing a role in spurring development when used in tandem with an array of existing programs — especially at a time when Massachusetts needs hundreds of thousands of new units of housing. 

“If we don’t do that, opportunity zones will be a disappointment for Massachusetts,” Curtis said. “If we do it, we can get some fabulous housing being built for people who need it.”