Subscribe
I spent this evening reading about Opportunity Zones, or “O-zones”, in the United States.
For a census tract to become an O-zone, it has to have a poverty rate of 20% or higher, or the median household income has to be less than 80% of the surrounding area. Governors are also only able to designate 25% of their eligible census tracts.
Here is a map of the areas that have been designated as Opportunity Zones.
Here is how these O-zones work. (All excerpts taken from this Forbes article.)
The law’s engine is a new breed of financial product, the opportunity fund, that offers investors a trifecta of attractive tax breaks. Here’s how it works. Investors who sell assets have 180 days to plow their taxable capital gains into an approved opportunity fund, which must hold 90% of its assets in Opportunity Zone projects. To put money to work fast, the law requires that the funds invest all of their cash within some specified time frame. (The Treasury Department is still deciding on that and other crucial details.) Tax on the original reinvested gain isn’t due until 2026, and the taxable gain is cut by 15%. Meanwhile the new opportunity investment grows tax-free, like a Roth IRA, provided it’s held for at least ten years. (If it’s sold earlier, it can be rolled into another opportunity fund and remain tax-free.)
Here is how it could get the real estate industry to take action.
For real estate developers, O-zones offer cheap real estate and unlimited, untaxed upside if a neighborhood takes off. Developers must do more than stash cash in crumbling property. To qualify for tax perks, they must make swift and significant upgrades (at least equal to the cost of the initial purchase). With real estate projects come new office buildings, industrial districts, restaurants and affordable housing—all of which can lay the groundwork for an economic boom. “The real estate aspect is a great catalyst to attract new businesses,” says AOL founder Steve Case, an early supporter of the O-zone initiative, whose Rise of the Rest Fund invests in backwater areas. “But it’s the startups that will be the real job creators.”
And here is how it could influence where new businesses decide to locate.
“If Facebook could have chosen to locate itself in an Opportunity Zone, like the Tenderloin in San Francisco, the investors would’ve paid no capital gains on their equity,” says Parker, who presumably would have been one of the big winners. The promise of mega-returns could send VCs, investment banks and private equity firms scrambling to launch their own opportunity funds to create incubators, scour second cities for overlooked talent or move portfolio companies into O-zones. “It wouldn’t surprise me if a lot of Silicon Valley VCs started to tell founders, ‘We’d like you to go over the bridge to Oakland, or we’d like you to go to Stockton,’” Parker says.
If you’d like to learn more about Opportunity Zones, check out the Forbes article.
On Monday, John Zimmer and Logan Green, the co-founders of Lyft, published this Medium post announcing their “approach to partnering with cities to introduce bike and scooter sharing” to their platform.
“Approach to partnering with cities” is undoubtedly a carefully chosen set of words given all the backlash going on right now around dockless scooters.
Nevertheless, this is an exciting announcement. I could have used a scooter this afternoon to get to a meeting. And this is all part of their larger goal of transforming Lyft into a multi-modal platform – one that will also support conventional public transit.
Here is an excerpt from the Medium post:
Transit, bikes, small electric vehicles, and infrastructure such as safe pedestrian paths and bike lanes, all play a large role in decoupling people’s right to mobility from car ownership. We know we can’t accomplish this alone, and we’re committed to working with cities and residents to bring these elements together in the most cohesive way to maximize a reduction in vehicle miles traveled.
The company has also set the goal that 50% of all trips on the Lyft platform will be shared rides by 2020. It is yet another example of the lines between public transit and ride sharing apps becoming blurrier.
Full post can be found, here.
The Urban Institute has a new study out that looks to explain why Millennial homeownership rates are lower than that of previous generations. The typical refrain is that Millennials have a lot more student debt and that the cost of housing in urban centers has risen faster than income levels. But this report tries to put some math behind those explanations. All data is for the US.
Not surprisingly, marriage and kids are significant drivers, and Millennials appear to be delaying both. According to the study, being married increases the probability of owning a home by 18%. If marriage rates in 2015 were the same as they were in 1990 (this is the time period for the study), the Millennial homeownership rate would be 5% higher. Having a kid increases the probability by about 6.2%.
There’s also a widening spread between the homeownership rates for more educated and less educated Millennials. Presumably the distinction is a 4 year university degree. Between 1990 and 2015, the spread between the two groups increased from 3.3% to 9.7%. This was identified as an area of “great concern” because of the possible long term implications.
Combine this phenomenon with the stats that white households have a higher homeownership rate compared to all other racial groups and that having parents who are homeowners increases the likelihood of also owning a home (let’s ignore, for a second, the other intergenerational transfers of wealth), and you have a recipe for rising wealth disparities.
Of course, some of you will undoubtedly argue that in this part of the world we are overly fixated on homeownership as a mechanism for wealth creation. I mean, there are many examples of very wealthy countries with homeownership rates that are far less than what they are here in Canada and the US. But that’s a discussion for a different blog post.
If you’d like to go through the full Millennial Homeownership report, you can do that here.
I spent this evening reading about Opportunity Zones, or “O-zones”, in the United States.
For a census tract to become an O-zone, it has to have a poverty rate of 20% or higher, or the median household income has to be less than 80% of the surrounding area. Governors are also only able to designate 25% of their eligible census tracts.
Here is a map of the areas that have been designated as Opportunity Zones.
Here is how these O-zones work. (All excerpts taken from this Forbes article.)
The law’s engine is a new breed of financial product, the opportunity fund, that offers investors a trifecta of attractive tax breaks. Here’s how it works. Investors who sell assets have 180 days to plow their taxable capital gains into an approved opportunity fund, which must hold 90% of its assets in Opportunity Zone projects. To put money to work fast, the law requires that the funds invest all of their cash within some specified time frame. (The Treasury Department is still deciding on that and other crucial details.) Tax on the original reinvested gain isn’t due until 2026, and the taxable gain is cut by 15%. Meanwhile the new opportunity investment grows tax-free, like a Roth IRA, provided it’s held for at least ten years. (If it’s sold earlier, it can be rolled into another opportunity fund and remain tax-free.)
Here is how it could get the real estate industry to take action.
For real estate developers, O-zones offer cheap real estate and unlimited, untaxed upside if a neighborhood takes off. Developers must do more than stash cash in crumbling property. To qualify for tax perks, they must make swift and significant upgrades (at least equal to the cost of the initial purchase). With real estate projects come new office buildings, industrial districts, restaurants and affordable housing—all of which can lay the groundwork for an economic boom. “The real estate aspect is a great catalyst to attract new businesses,” says AOL founder Steve Case, an early supporter of the O-zone initiative, whose Rise of the Rest Fund invests in backwater areas. “But it’s the startups that will be the real job creators.”
And here is how it could influence where new businesses decide to locate.
“If Facebook could have chosen to locate itself in an Opportunity Zone, like the Tenderloin in San Francisco, the investors would’ve paid no capital gains on their equity,” says Parker, who presumably would have been one of the big winners. The promise of mega-returns could send VCs, investment banks and private equity firms scrambling to launch their own opportunity funds to create incubators, scour second cities for overlooked talent or move portfolio companies into O-zones. “It wouldn’t surprise me if a lot of Silicon Valley VCs started to tell founders, ‘We’d like you to go over the bridge to Oakland, or we’d like you to go to Stockton,’” Parker says.
If you’d like to learn more about Opportunity Zones, check out the Forbes article.
On Monday, John Zimmer and Logan Green, the co-founders of Lyft, published this Medium post announcing their “approach to partnering with cities to introduce bike and scooter sharing” to their platform.
“Approach to partnering with cities” is undoubtedly a carefully chosen set of words given all the backlash going on right now around dockless scooters.
Nevertheless, this is an exciting announcement. I could have used a scooter this afternoon to get to a meeting. And this is all part of their larger goal of transforming Lyft into a multi-modal platform – one that will also support conventional public transit.
Here is an excerpt from the Medium post:
Transit, bikes, small electric vehicles, and infrastructure such as safe pedestrian paths and bike lanes, all play a large role in decoupling people’s right to mobility from car ownership. We know we can’t accomplish this alone, and we’re committed to working with cities and residents to bring these elements together in the most cohesive way to maximize a reduction in vehicle miles traveled.
The company has also set the goal that 50% of all trips on the Lyft platform will be shared rides by 2020. It is yet another example of the lines between public transit and ride sharing apps becoming blurrier.
Full post can be found, here.
The Urban Institute has a new study out that looks to explain why Millennial homeownership rates are lower than that of previous generations. The typical refrain is that Millennials have a lot more student debt and that the cost of housing in urban centers has risen faster than income levels. But this report tries to put some math behind those explanations. All data is for the US.
Not surprisingly, marriage and kids are significant drivers, and Millennials appear to be delaying both. According to the study, being married increases the probability of owning a home by 18%. If marriage rates in 2015 were the same as they were in 1990 (this is the time period for the study), the Millennial homeownership rate would be 5% higher. Having a kid increases the probability by about 6.2%.
There’s also a widening spread between the homeownership rates for more educated and less educated Millennials. Presumably the distinction is a 4 year university degree. Between 1990 and 2015, the spread between the two groups increased from 3.3% to 9.7%. This was identified as an area of “great concern” because of the possible long term implications.
Combine this phenomenon with the stats that white households have a higher homeownership rate compared to all other racial groups and that having parents who are homeowners increases the likelihood of also owning a home (let’s ignore, for a second, the other intergenerational transfers of wealth), and you have a recipe for rising wealth disparities.
Of course, some of you will undoubtedly argue that in this part of the world we are overly fixated on homeownership as a mechanism for wealth creation. I mean, there are many examples of very wealthy countries with homeownership rates that are far less than what they are here in Canada and the US. But that’s a discussion for a different blog post.
If you’d like to go through the full Millennial Homeownership report, you can do that here.
Share Dialog
Share Dialog
Share Dialog
Share Dialog
Share Dialog
Share Dialog