A New Tax Break for Poor Neighborhoods Could Benefit Luxury Developers

Recovery in the U.S. from the Great Recession has been uneven. Superstar cities such as New York and San Francisco have sprung back, while plenty of rural areas and Rust Belt towns are still in a slump. Buried in the tax overhaul late last year was a provision to address some of these economic disparities by allowing states to designate “opportunity zones” in low-income areas. Investors who develop real estate or fund businesses in these zones will be eligible for tax breaks. The concept is not new—Congress has launched similar efforts in the past—but this one is more free market in spirit than its predecessors.

Governors have been scrambling over the last few months to submit proposed zones to the U.S. Treasury Department, which certified some of them earlier this month. The rest had to make their submissions by April 20.