Dr. Ben Carson
Secretary of Housing and Urban Development
2019 Opportunity Zone Expo Remarks
Brooklyn, New York, Marriott Hotel, August 9, 2019
As prepared for delivery. The speaker may add or subtract comments during his presentation.
Thank you, Mark, and thanks to all of you for inviting me to join you. On behalf of HUD, it is a privilege to share my vision for promoting economic opportunity – through the use of Opportunity Zones – with the many leaders and pioneers in housing here today.
Thanks to this Administration’s policies, the American people are witnessing a “rising tide” of prosperity that is floating all boats. There is record low unemployment, a historically strong national economy, and unprecedented job growth. Consumer confidence, productivity, and financial optimism have all come roaring back.
But there are still many Americans who struggle to climb the ladder of success. Entire rungs on this ladder are removed when people cannot find affordable housing, secure an education or job training, or attract financial capital into their communities.
At HUD, we believe no family should be forgotten, and no individual should be left behind. All people in need have the chance to succeed when they are given the right incentives and opportunities.
When I was in fifth grade, if you had told my classmates and teachers that I would go on to be a pediatric neurosurgeon – then later Secretary of HUD – they would have laughed at you and said I was hopeless case, because I couldn’t even do basic math. It turns out the reason I was horrible at math was because I couldn’t even see the board from the back of the class. A mandatory eye exam showed I was handicapped by bad vision, and I received an opportunity that changed my life forever: I was given glasses.
Soon enough, my math scores were among the top in the class. But they didn’t get that way by poking everyone else in the eye – it happened because there was an opportunity to give me self-sufficiency, without taxing others or bringing them down.
When I think of ways to increase economic opportunity on a society-wide level – and how we can help those most in need – we must to have the humility to recognize that government doesn’t always have all the answers. But government can help the market find the answers, by building the best conditions for the innovation and ingenuity of the private sector to thrive. The private sector is ultimately the provider of jobs, training, and sustainable housing, which provide the pathway to self-sufficiency that can drastically increase financial mobility for our nation’s most vulnerable communities.
But government must be responsible and responsive to our nation’s needs. We can do more than just wait for opportunities - we can create them. And that is why this Administration has championed the extraordinary nationwide initiative known as “Opportunity Zones.”
Few programs in modern American history have the power to improve so many lives as Opportunity Zones, which are now home to nearly 35 million Americans – including 2.4 million HUD-assisted individuals – in all 50 states and five U.S. territories. That’s roughly 10 percent of the country, deliberately targeted for revitalization.
As you know, the purpose of Opportunity Zones is to spur private investments into economically distressed communities through powerful tax incentives. These incentives allow an investment vehicle, called a “Qualified Opportunity Fund,” to invest capital gains into projects situated in those neighborhoods of America that are often overlooked or forgotten. Investors can defer and reduce their tax liability on capital gains by investing their realized gains into new construction, rehabilitation, or businesses expanding in these areas of high need.
Unlike previous community investment programs in earlier decades, anyone can invest in Opportunity Zones, whether they are a large institutional entity or an ordinary individual. And in some cases, the capital gains tax for investors can be reduced all the way down to zero.
But Opportunity Zones are also designed to serve local communities for the long-term. Only investors who commit capital for five, seven and ten years receive the tax-saving rewards. That way, we can prevent the kind of practices that are “here today, gone tomorrow” and make sure new growth – and new jobs – are “here today, and here to stay.”
This win-win situation is one of the reasons Treasury Secretary Steven Mnuchin predicted that $100 billion dollars in private investment would be directed to local communities across the nation in Opportunity Zones. But the impact of Opportunity Zones is not just some future theoretical; it’s already here.
The fund directory maintained by the National Council of State Housing Agencies recently released data that Qualified Opportunity Funds have committed nearly $43 billion dollars in anticipated investments. Of that enormous amount, 91 percent of funds plan to invest in multifamily residential, student housing, mixed-use, hospitality, or other commercial developments. And nearly 60 percent of funds plan to invest in affordable and workforce housing or community revitalization.
As for direct impact, growth in acquisitions of developable sites in Opportunity Zones surged in 2018 compared to the rest of the country. According to Zillow, property sale prices in Opportunity Zones have appreciated at a rate of more than 20 percent, double the appreciation rate for eligible but not selected areas.
Not long ago, I visited an Opportunity Zone in Salt Lake City, Utah, which was using new funds to build a “life sciences corridor” in poor neighborhoods. Thousands of children will soon have access to a whole new world of science, technology, engineering and math. One of the buildings being developed was a specialized employment training center for young adults with autism. More than $41 million dollars was invested into this “HUB of Opportunity,” which was able to attract funding from all levels – federal, state, local, nonprofit, and the private sector.
That kind of public-private partnership is a showcase for what is possible when we put our differences aside and get back to actually working together. Each of us can do a better job of moving past the political letters in front of our name like “R” or “D” – and focus on the “U-S-A.”
We are a nation with a government that is “of the people, by the people, and for the people.” There is no place for class warfare – only our common welfare.
To ensure Opportunity Zones reach their full potential, last December, President Trump established the White House Opportunity and Revitalization Council, which I have the privilege to chair. Scott Turner is the Executive Director and he has been doing great work for us as well. The Revitalization Council - which consists of members from 17 federal agencies and federal-state partnerships – has a mission to make better use of public funds in the revitalization of economically distressed communities.
The Revitalization Council has also conducted a listening tour of Opportunity Zones throughout the nation to incorporate input from community leaders, entrepreneurs, and investors — so the voices of the American people are always in our ear.
As of now, the Council has identified more than 160 programs that could increase targeting to Opportunity Zones through grant preference points, loan qualifications, reduced fees, and eligibility criteria modifications. And we have already implemented a tremendous number of these actions across agencies.
One such action at HUD involved our announcement this summer that our Federal Housing Administration, or “FHA”, is unveiling a new package of incentives to encourage multifamily property owners to invest in developments located in Opportunity Zones. These new incentives involve tens of thousands of dollars in reduced application fees for FHA mortgage insurance in Opportunity Zones, and the appointment of a dedicated team of underwriters to ensure expert and efficient processing of such applications in Opportunity Zones.
Another such action is the addition of preference points for the Choice Neighborhoods Program – both the Implementation and Planning Grants. This annual competitive grant program leverages significant public and private dollars to support locally driven strategies, and addresses struggling neighborhoods with distressed public or HUD-assisted housing.
Likewise, we have been pleased with the private sector’s response this past spring to the IRS and Treasury’s release of the second set of proposed regulations for Opportunity Zones. These proposed regulations provide greater clarity and guidance for investors, fund managers, developers and sponsors, pertaining to qualified Opportunity Zone business property, the treatment of tangible leased property, the 90-percent asset test, and more. There seems to be a consensus that this guidance is generally taxpayer-friendly and provides the flexibility that businesses and investors were seeking.
And today, I am pleased to announce another action to further promote the economic development taking place in Opportunity Zones.
Under the guidance we are releasing today, HUD has determined that all Opportunity Zones will be automatically eligible areas under Section 220 of the National Housing Act, which insures mortgages for the construction and rehabilitation of mixed-use housing projects.
Previously, Section 220 mortgage insurance was reserved for urban renewal areas, code enforcement areas, and other places designated for revitalization. But with this extension, all Opportunity Zones will be eligible to receive Section 220 mortgage insurance. Section 220 loans allow for 30 percent of effective gross income to be derived from commercial space in comparison to our more commonly-used 221-d-4 program where the maximum allowable commercial and retail space is limited to 15 percent of effective gross income. This expanded eligibility will hopefully further incentivize private investment in Opportunity Zones and usher in the growth of both quality rental housing and as-needed commercial space.
This expanded eligibility will further incentivize private investment in Opportunity Zones and usher in the growth of quality rental housing in urban areas.
This extremely positive regulatory direction is one more step toward achieving that goal and bringing business communities and local communities closer together, maximizing not just opportunity – but unity as well.
There’s a reason for the expression, “The home is where the heart is.” A home is not simply a physical structure — it is a social, cultural, and economic engine. A home is a place where families come together. It is a place where friendships are forged, memories are made, and the bonds of community are strengthened.
Housing problems are fundamentally human problems – and ultimately, that is what truly matters. Through Opportunity Zones, we can provide millions of Americans with a path to self-sufficiency, by helping them right in the places they call home.
In the months ahead, we will continue to listen to the voices of both housing stakeholders and Americans from every background and all walks of life, to implement any actions that can improve Opportunity Zones for everyone.
Together, we can make the bold goal of America as a “Land of Opportunity” an everyday reality for all the citizens of our great nation, to be strengthened and passed on to the next generation of Americans that we at HUD have the honor to serve.
Thank you, and God bless.