Trump’s ‘Big Beautiful’ Tax Bill and the Future of Community Development

As Trump’s massive tax and spending budget bill inches closer to passing, the “One Big, Beautiful Bill Act” looks very likely to bring significant, landmark changes for two different approaches to incentivizing investment in historically disinvested communities.

One approach hinges on dangling tax-free profits to lure wealthy investors into making investments in disinvested communities. The Opportunity Zones program was first piloted through the 2017 Tax Cuts and Jobs Act and passed into law during the first Trump administration. It’s currently scheduled to expire at the end of next year, but the new legislation would make the program permanent.

In the other approach, investors receive tax credits for making investments into qualified projects selected through a complicated application process. These include the Low Income Housing Tax Credit and the New Markets Tax Credit; the former is already permanent, and the latter would become permanent with the passage of this new legislation.

These two approaches aren’t mutually exclusive. Opportunity Zone tax breaks and New Markets Tax Credits can be used for the same project. They target the same areas; Opportunity Zone-eligible census tracts are primarily a subset of New Markets Tax Credit-eligible census tracts. All of these areas have relatively high poverty rates, lower than average median income and higher than average unemployment.

Both approaches have a track record of supporting billions of investment dollars every year into their target areas. Both approaches have garnered criticism, particularly when it comes to their ability to mesh with plans and visions for development that are rooted in community.

But the approach of one of these programs – Opportunity Zones tax breaks – is fundamentally at odds with a principle that’s becoming increasingly central in many historically disinvested communities: that investment should be driven by community priorities, not by the pursuit of tax-free profits for wealthy investors.

No Se Vende

This July marks a decade of me working with Next City. In that time, I’ve published more than 600 stories and my first book. I’ve interviewed and quoted more than 1,500 people, 75% of whom are women or people of color. I’ve spoken with and learned from at least that many more who weren’t speaking with me on the record.

If I’ve learned anything from these people and their communities, it’s that there’s one thing worse than being ignored by investors and financial institutions: being bought and sold like chattel on global markets for profit by investors who are already rich and powerful.

From New York to the Twin Cities to Denver to the Bay Area, I’ve seen protest chants, protest signs and flyers pasted to telephone poles saying some version of one message: This neighborhood is not for sale.

For some pundits, these signs signal an anti-development NIMBYism, one that desires to protect “neighborhood character” while undermining “progress” measured in terms of housing units built. But if you spend time with people marching with “Not For Sale” protest signs down Jerome Avenue in the Bronx or street vending along Cesar Chavez Avenue in Boyle Heights next to a “El Pueblo No Se Vende” flyer, it won’t take long to see the obvious.

These are not privileged, predominantly white homeowners clinging to white supremacist notions of neighborhood “character.” Nor are they paid mouthpieces for such homeowners.

More importantly, behind “No Se Vende” is a sophisticated analysis born of lived experience. It’s not only a fight against rising rents—it’s a deeper understanding of how those with economic power, whether landlords, bosses, or plantation owners, behave toward those without it.

People talk. And in Black and Brown neighborhoods, the gossip started circling around the same names, an increasingly concentrated group of landlords. These weren’t just local house flippers, but something bigger. At first, these names were whispered among neighbors and family. Over time, tenants and community organizers connected those conversations across cities and regions.

What they saw felt eerily familiar to communities whose ancestors included enslaved people, dispossessed Indigenous nations, colonial subjects, migrant farmworkers, and factory laborers. Once again, Black and Brown communities were being treated as assets to buy, sell and commodify for profit – this time by deep-pocketed, increasingly consolidated landlords.

According to investor data tracking platform Preqin, private real estate assets under management went from $64 billion in 2000 to over $1 trillion in 2019. Much of the growth came after 2008, in the aftermath of the global financial crisis, when federal housing agencies began selling off thousands of distressed mortgages to private equity management firms.

Real estate went from a predominantly local enterprise to a global “asset class” for billionaires, large-scale institutional investors like pension funds and insurance companies, and sovereign wealth funds from countries around the world.

The aunties, titas and abuelas were right. And they don’t like what that shift has meant for their communities: higher rents, higher eviction rates and new forms of discrimination fueled by investor-driven property management tools and tenant screening technologies that often rely on racist algorithms.

Opportunity for whom?

Rather than pushing back against the rise of real estate as an investor asset class, Opportunity Zones invites it in. The program tells us that $1 trillion is not enough — that investors should have even more real estate assets under management, and that more of those dollars should go to low-income, high-poverty, high-unemployment communities that investors have hitherto ignored.

How much more? More than $100 billion so far.

That’s the estimated amount of investment dollars that have flowed through Opportunity Zone tax breaks from 2018 to 2024. Although Opportunity Zones were originally billed to support entrepreneurship and business growth in target areas, ultimately more than 98% of Opportunity Zone dollars have gone into real estate projects.

Those dollars have come from investors who are already wealthy. You have to already have some wealth you can sell in order to use the Opportunity Zones tax break at all. Under the initial Opportunity Zones pilot program (which is still open until the end of 2026), the only dollars that can be invested using the tax break are dollars earned from capital gains — meaning profits earned from selling off a previous investment. In 2017, just 7.3% of U.S. federal tax returns reported any capital gains income.

Plus, most Opportunity Zone investments are made through what’s known as private offerings, the kind of investment opportunities that are usually only open to “accredited investors.” These investors are defined by the U.S. Securities and Exchange Commission as individuals having a personal net worth of at least $1 million or individual income of at least $200,000 (or $300,000 with a spouse) for the previous two years.

What have communities gotten out of that $100 billion so far? The 2017 legislation that created Opportunity Zones did not contain robust reporting or public disclosure requirements, which makes the tax break’s true impact hard to measure. And it is still early for many Opportunity Zone projects, which only started inking deals in 2018.

But besides added production of mostly market-rate rental housing units, the evidence so far suggests Opportunity Zones haven’t resulted in very much benefit for residents of target areas.

A 2021 study found only “modest, if any, positive effects of the Opportunity Zone program on the employment, earnings, or poverty of zone residents. One 2023 study found “no evidence of a private investment response that has spread beyond multi-family housing, limiting the potential of the policy to stimulate broad economic development and improve the well-being of residents.”

One of the big questions around the impact of Opportunity Zones is whether the tax break would encourage the development of projects that would not have happened otherwise. It’s a tough question to answer, given the sheer number of variables that affect the flow of capital and investment.

But in one early assessment, researchers at the nonpartisan Urban Institute heard from developers who said many projects would have moved forward even had the incentive not been available. Even the NYU Furman Center, which receives funding from large banks and New York City’s real estate industry, wrote that “a number of factors, such as zoning changes and state tax incentives, cast doubt on whether the Opportunity Zone program is the primary driver spurring development in designated tracts.”

Though there are isolated examples of Opportunity Zone investments that show more community benefit than others overall, Opportunity Zone investors will all want to cash out at some point, which means selling the underlying properties to other investors for a profit. Under the tax incentive, if investors wait at least 10 years before cashing out, any profits from cashing out Opportunity Zone investments will be tax-free — meaning even more money for investors who are already wealthy.

Since the first Opportunity Zone investments were made in 2018, the first wave of tax-free profits from investors selling off those investments won’t be until 2028. There are no restrictions on whom Opportunity Zone investors can sell their investments to — except in San Francisco, which has a law that gives a city-approved list of community organizations the right to first bid on apartment buildings before landlords can put them on the open market, or in D.C., which has a law that gives tenants the right to the first bid on their apartment building if the owner decides to sell the property.

D.C. landlords are currently trying to gut that jurisdiction’s tenant opportunity to purchase law. Doing so would make things at least slightly easier for Opportunity Zone investors who want to cash out and earn their tax-free profits starting in 2028.

Credit where credit is (over)due

New Markets Tax Credits also typically work by bringing in investors as owners of target-area properties for a predetermined period of time. But under that program’s prevailing best practices, investors don’t get a huge windfall of tax-free profits from selling off properties at the end of the predetermined period.

Instead, New Markets Tax Credits get paid out to investors over a seven year “compliance period,” at the end of which the investors typically exit the project for a nominal buyout amount, often just $1.

At that point, the investors’ ownership stakes typically just transfer to the original project sponsor — often a community development corporation, or perhaps the business or nonprofit that has been a tenant of the building up to that point. New Markets Tax Credits have even helped finance construction of public schools in Mississippi and Texas. The tax credits essentially provide all the return on investment from the project for the tax credit investors.

The vast majority of New Markets Tax Credit investors are banks, which also receive credit for making tax credit investments as part of their obligations under the Community Reinvestment Act, a federal law that requires banks to meet the credit needs of low-income communities.

With their legal obligations as a prime motivating factor behind their involvement, the banks that are usually involved in New Markets Tax Credit projects don’t seek out windfall profits from selling their ownership stakes in the underlying projects.

The implementation of New Market Tax Credits still has a lot of room for improvement. The complicated legal and financial paperwork can be a barrier for many communities to benefit from those tax credit programs. The heavy lift of that paperwork has meant that a project typically must have a budget upwards of $15 million just to be worth the effort of going through the New Markets Tax Credit process — leaving out many smaller projects that communities would like to see happen.

Unlike Opportunity Zones, for which there is no annual limit, Congress has made only a fixed amount of New Markets Tax Credit allocations available every year — just $5 billion. This means many projects have to try for two or three years in a row before receiving any New Markets Tax Credit allocations.

The fact that New Markets Tax Credits have never been made permanent has also discouraged many potential investors as well as many community-based organizations from taking the time to get comfortable with the program’s sophisticated, multi-layered allocation process.

Rather than rewarding the tax credits directly from the federal government, the New Markets Tax Credit program delegates that task to a national network of certified “community development entities.” This includes nonprofit as well as for-profit organizations, some affiliated with large banks and smaller community banks, and some affiliated with local or regional economic development authorities. A single project can receive New Market Tax Credits from multiple community development entities.

The process is far from perfect; community development entities can be cliquish or stingy as gatekeepers. But the intention is to ensure that projects actually deliver benefits to their surrounding communities.

There is no such accountability at all under Opportunity Zones, which only require funds be invested in projects or businesses located in eligible areas.

Despite the program’s limitations, in communities New Markets Tax Credits have reached, researchers have found evidence of community benefits. The Urban Institute found significant increases in local economic activity following completion of New Markets Tax Credit projects, including increases in the number of firms, jobs, residents with jobs, median income, and reductions in poverty.

Not all community development

There’s a lot in Trump’s budget bill to worry about when it comes to cities, racial equity, climate justice and more. The rollbacks to climate financing in particular are a direct hit to all three of those priorities in one fell swoop. Astronomical increases to immigration enforcement promise further disruption to families, communities and key economic sectors from farming to restaurants and hospitality. Dramatic cuts to Medicaid, SNAP and other social safety net programs will be crippling.

Given the urgency of what has already happened and what is about to happen to low-income communities in the U.S., it might seem like a silver lining of sorts that both Opportunity Zones and New Market Tax Credits are about to become permanent.

But only New Markets Tax Credits have so far produced substantial evidence of impact. And perhaps more importantly, the tax credits have also proven they can work within the “No Se Vende” framework that more and more communities are demanding from real estate and community development.

“Not For Sale” doesn’t mean not for development. Community land trusts, neighborhood trusts, real estate cooperatives and other approaches all embody ways of acquiring, developing and managing real estate in ways that intentionally seek to disrupt the constant cycles of speculatively buying and selling properties for the sake of profit.

These approaches are appearing from coast to coast, and they’re building momentum, financing acquisitions and construction or renovations by raising capital from investors who have taken the time to build real relationships with the residents, local businesses and community organizers at the heart of these models — and they’re not looking for tax-free profits.

New Markets Tax Credits have already started making inroads to support this ecosystem of non-speculative real estate development entities. Champlain Housing Trust, the nation’s largest community land trust, has been through three New Markets Tax Credit deals so far — resulting in permanently affordable rental housing, affordable condominiums and community space in its hometown of Burlington, Vermont.

Tax credits alone are not enough to make up for what these communities have been denied all this time. Policymakers at all levels owe these communities so much more. But it’s not just about more dollars invested. These communities are not simply asking for more investment by any means necessary.

“No Se Vende” is a clear challenge from communities to anyone that wants to work with them. It’s a challenge that cuts across every level of government, the private sector and everything in between. It’s a challenge that not every community development policy is able to meet.