Member Of Departed HUD Leadership Calls For 10% More Opportunity Zones
During the Trump administration, Alfonso Costa Jr. was deputy chief of staff at the Department of Housing and Urban Development under Secretary Ben Carson. He oversaw housing policy for the federal government, including opportunity zones.
The 32-year-old last year moved to Florida to become executive vice president of the Falcone Group, which has heretofore focused on market-rate projects. On a Bisnow webinar Jan. 27, he discussed its new affordable housing arm and called for the Biden administration to improve on and expand opportunity zones.
Costa was hired by Falcone Group to start an affordable and workforce housing division. He revealed that it will be called Momentum Residential and that his team has already identified a few project sites.
He said that while Florida is enjoying an influx of wealthy residents, housing prices are surging, and even with low interest rates, there is a growing need for affordable rentals. Costa suggested that more public-private partnerships could address the problem.
“I'm excited about the prospects of local governments continuing to identify land that they own, which is either currently being underutilized or in many circumstances just sitting idle or vacant in their entirety," he said. "And what better way to potentially address multiple issues, going back to the demand side of things from the housing standpoint that I mentioned earlier, than to allow private sector partners to come in and offer an upfront capital contribution or ongoing annuity payments and simultaneously agree to build what is a community-driven project?”
On the subject of opportunity zones, Costa said he expects the Biden administration to focus on and improve the program. Some critics have called for more accountability to determine whether or not opportunity zones are truly helping low-income communities.
Costa said reporting requirements could be amended or self-certification provisions could be changed or eliminated, but the new administration could allow the Department of the Treasury more tools to measure poverty rates, housing affordability and job creation, which would most easily point to direct causation.
“I think that the Biden-Harris administration will do the best they can, whether it be through budget reconciliation or through a subsequent potential COVID relief package, to aim to provide the IRS with those capabilities,” Costa said.
Costa said that given the coronavirus pandemic, increased unemployment and the fact that the governors who recommended which census tracts would be deemed OZs in the spring of 2018 have since been replaced by new governors, the new governors should be allowed to increase OZ tracts by 10% so long as the focus is on eligible low-income communities.
Among the more than 8,760 OZs in the U.S. and 427 in Florida, tracts that aren't low-income have been shoehorned into the program, allowing developers to target gentrifying areas rather than the poor communities that the program was intended to help.
"I think the Biden-Harris administration has — no pun intended — a huge opportunity to, in a lot of ways, make changes to the program while still maintaining the initial bipartisan support that was at the very source and initial stages of it,” Costa said.
Costa was joined on the webinar by luxury condo developer Edgardo Defortuna, president and CEO of Fortune International Group, who said that new wealthy residents have heated up the market for waterfront property, absorbing condo inventory and single-family homes that had sat on the market for years.
“I'm really concentrating and making alliances with the new players in the market,” Defortuna said. “And we're really a lot more active in New York. We register all the projects that we represent in the New York market and are promoting them heavily and making alliances with New York brokers to bring us customers.“
Terranova Corp. founder and Chairman Stephen Bittel operates a nearly billion-dollar portfolio that includes retail, industrial, office and multifamily, including properties on famous shopping district Lincoln Road. Bittel called for Florida politicians to take action on pressing big-picture issues. He pointed out that with 35 mayors and 35 building departments in its municipalities, South Florida’s leadership gets muddled.
“If traffic gets worse — it's hard for traffic to get any worse — there's no more road capacity,” he said. “We have transportation issues. The wastewater underground distribution system is estimated to be a $6B fix. We dump untreated sewage into the ocean every minute of every day, and we need a plan to deal with that. Septic tanks need to be banned and replaced. We need to underground all our power lines. If ever there was a moment in time where our political leadership would show the strength to act, it can be a moment when the cost of long-term debt capital is almost zero, and they could issue bonds to do this and probably get federal government subsidies to move forward.”