Real estate investments were long associated with wealth creation and city growth. Miami was no exception — until the housing bubble popped in 2008. The lesson: operating in a vacuum nearly flattened South Florida.
A decade later amid Wynwood’s bustle and the record 1.3 billion in venture capital in one of the most immigrant-powered ecosystems in the country, our prosperity isn’t equally shared. We have one of the highest concentrations of full-time billionaires (30 to be exact) and inequality rates on par with Latin America.
Recently, the government rolled out guidelines known as Opportunity Zones (OZs), to incentivize investment in 8,700 low-income areas. Of those, 68 are in Miami-Dade. Organizations citywide are holding information sessions about the program, including a two-day summit Sept. 27 and 28 hosted by the City of Miami.
This begs the question, what should our role be?
Make no mistake, Miami isn’t alone. America is grappling with issues as complex as they are tangled. The future maturation of our city depends on synergies that cross institutional lines and many interests. Not a single actor among us — no inventor, visionary leader, nor entertainer-and-education investor Pitbull — can go it alone.
Advocates like Bruce Katz, lab director at Drexel University’s Nowak Metro Finance and former Centennial Scholar at the Brookings Institution, say healthy real estate markets, technological progress and co-working spaces help OZs take off.
Given that our entrepreneurship center, CIC Miami, is located within an opportunity zone, we agree that co-working spaces and OZs should intersect. As secondary cities begin to outpace Silicon Valley, geographic diversity can help “smaller VCs to strike gold, explains Bloomberg Analyst, Noah Smith.
While this sounds promising, historical investment using tax benefits has not always helped the bottom of the pyramid. Current fears by communities with OZs include displacement, destruction of cultural authenticity, and exploitation of local resources.
Since the 1980s, Republicans and Democrats have launched versions of “enterprise” or “empowerment” zones offering tax breaks in exchange for jobs. Critics say unimpressive results in some cases lead to higher unemployment rates and lower wages. The problem, explains Timothy Weaver, professor of Urban Policy and Politics at University at Albany: ‘’Money flows into the safe bets.’ As an example, he cites Louisville, Ky., where some gentrified areas were designated as opportunity zones while some poorer tracts were not. “The primary beneficiaries of the program are the investors.”
How to make Miami’s experience different and more positive?
1. Hire a full-time OZ Chief.
Local philanthropic institutions should fund this role instead of waiting for an appointment. A neutral convener can ensure conversations happen in the same room.
2. Map assets to avoid duplication.
Local foundations organize cities by coordinating efforts, mapping assets, and helping residents who live near the zones express their preferences for improving their neighborhoods. One way to avoid duplication could be to use Resilient 305’s strategy as a road map.
3. Approve a regulatory framework.
Regulations are important because they track whether incentives are generating the desired effects. States including Texas, Alabama, Kentucky and Rhode Island introduced legislation to create tax credits for rural OZ investment. In Nebraska, Gov. Pete Ricketts has tied them to existing incentive programs such as the state’s Affordable Housing Trust Fund and Job Training Cash Fund and Business Innovation Act.
Florida, however, continues to fall behind. State Rep. Anika Omphroy’s Bill 481, which would have created opportunity zones development agencies failed to pass. No other legislative proposals are on the table.
4. Set impact guidelines with accountability standards.
Investors should commit to a reporting framework that establishes measurable targets with guardrails like those designed by the Federal Reserve and The Beeck Center. Impact investors must share strategies and collaborate. Since impact investing has begun to outperform traditional investment, accountability is key.
5. Maximize Opportunity Funds.
Opportunity Funds have emerged as private sector investment vehicles that invest 90% of their capital within OZs. Currently about 203 funds being tracked exceed $53 billion that will be put back into community development initiatives. There’s also $6 trillion of potential gains in the market that could be allocated.
Cleveland is a salient example that built an entire system. The Chamber of Commerce included a prospectus, the city passed legislative policies, created a fund and used a partner’s tech platform that allows the public to track, vet, and measure projects.
South Florida already has a framework. Miami-Dade, Broward, Palm Beach presented one bid to build Amazon’s HQ2. Reports showed that 25,000 jobs might not make any sort of tangible impact. Nonetheless, we pledged transit systems, tax breaks and talent pipelines — a combined effort that put us on the Top 20 list. For Javier Alberto Soto, President and CEO of The Miami Foundation and incoming President and CEO of The Denver Foundation, Opportunity Zones should engender a similar mobilization, “given the likelihood of success and greater long-term benefits to the community.” Yet our plans gather dust in a drawer.
In the end, if we don’t make a plan for opportunity zones, we’ll create opportunities for exploitation, corruption and deepened inequality. At best, Miami will dazzle with a new set of buildings. What a loss that would be for our city — to be shortchanged of resources we need to build the vibrancy and vitality we all deserve.
Natalia Martinez-Kalinina is an organizational psychologist and strategist focused on merging innovation, entrepreneurship, and community impact. She oversees the expansion of the Cambridge Innovation Center (CIC) in Miami, a $4 million annual revenue business located inside an Opportunity Zone. Previously, she served as one of six product strategists at Ultimate Software. She has been a contributor to outlets such as The Huffington Post, the World Economic Forum, Mic, and La Nacion.
Julia Wilkinson is an opportunity zone strategist and ecosystem builder. She is the founder and CEO of imvest, a consulting firm empowering investors and entrepreneurs to build a new economy where social impact is the core value proposition and opportunity. She has over a decade of experience in capital markets, and an MPA in urban policy from Columbia SIPA.