How His Obscure Tax Break Became a $60B Venture Fund for Low-Income America
WHY YOU SHOULD CARE
In today’s America, economic mobility comes down to your ZIP code.
By Carly Stern
Steve Glickman had his eye on economic pressure in the Midwest before the 2016 election — before coastal pollsters scratched their heads at President Donald Trump’s election and reporters poured into flyover country.
Beginning in 2013, Glickman and a small team — including former Facebook president Sean Parker — were quietly assembling a coalition for an obscure tax policy later called “opportunity zones.” Then 2016 happened. The lens Glickman was peering through came into national focus, showing a window of opportunity for this wonky policy to resonate with ordinary people.
The Detroit native and former Obama White House adviser, now 39, was trying to lure investment funds into low-income ZIP codes. The federal Opportunity Zone program, passed as part of the Republican-driven Tax Cuts and Jobs Act of 2017, offers 10 years of tax relief for capital gains on investments in roughly 9,000 certified zones. The incentive was designed as an antidote to geographic inequality: the gap between rich and poor places, which has widened since the recession. This inequality drives national patterns like the clustering of jobs in “superstar cities,” brain drain of young professionals and waning diversity as longtime residents are priced out. But the outcomes also manifest in people: suicide, opioid addiction, poor health.
It tests a question central to the American dream: if you build it, will they come?
In Glickman’s eyes, economic development is a question of chicken-or-egg. Thriving local businesses attracts real estate and investment, but businesses follow healthy economies. This is why Glickman believes opportunity zones introduce another “tool in the toolbox” that’s especially transformative for second-tier cities. He sees a market rather than a single program, one that could pave the way for an industry as powerful as venture capital or spur giving at the scale of the federal charitable tax deduction (filers take the deduction on hundreds of billions of donations per year). There isn’t one comprehensive tracker, but the national accounting firm Novogradac estimates that roughly 260 opportunity zone funds now represent $63.5 billion in investing capacity. It tests a question central to the American dream: If you build it, will they come?
It’s a dream lived out by Glickman’s grandparents, who survived the Holocaust and boarded a boat to America without passports. “Within the span of basically two generations, my family had moved from being murdered in the country they’d grown up into me having an opportunity to work in the White House,” says Glickman, who exudes an earnest, thoughtful energy that syncs with his Midwestern roots (he cites Raj Chetty research on inequality, and with two young kids, jokes that he has a “lot of startups in life” right now).
He caught the politics bug during his childhood in California and moved to Washington, D.C., to study at Georgetown, where Glickman stood out as a creative, empathetic and solutions-oriented thinker, says Dan Porterfield, former Georgetown professor and CEO of the Aspen Institute. But his aspirations never blinded him to pragmatism. “Steve has the patience to work through the nitty-gritty details, including kinks and counterarguments, while holding onto the vision and the idealism that [this work is] worth doing,” Porterhouse says.
After law school and a stop at the U.S. attorney’s office in D.C., Glickman became a senior economic policy adviser in the White House during Barack Obama’s first term. In 2013, he co-founded the Economic Innovation Group (EIG) with Parker and John Lettieri. This public policy organization would become the laboratory for opportunity zones. Glickman now runs an advisory firm, Develop LLC, in Washington to help investors navigate the space. Projects that solve pressing community needs and have a lasting physical footprint most excite him — film studios, affordable housing and renewable energy plants are a few. Black mayors, investors and fund managers who historically were excluded from economic development programs have been early opportunity zone champions, he notes, while some White liberals and White conservatives tend to be the critics (60 percent of opportunity zone residents are nonwhite).
At the same time, both supporters and critics worry the program has easily exploitable loopholes, and that even well-intentioned local leaders — who have the power to designate opportunity zones — don’t understand it. There should have been additional rules of the road early on, says Steve Benjamin, mayor of Columbia, South Carolina. “It’s kind of like you’re building a car while you’re driving down the highway,” Benjamin says.
For one, some governors submitted ZIP codes that technically met requirements but had less urgent needs. So developers in gentrifying areas like downtown Portland, Oregon, are simply incentivized to funnel money into luxury apartment buildings they would have built anyway rather than new affordable housing. Another development project, Port Covington in Baltimore, drew attention because it qualified due to a mapping error.
What’s more, supporters worry the program’s intent has been co-opted as Trump vocalizes support, and his allies, like former New Jersey Gov. Chris Christie and the family of presidential son-in-law Jared Kushner, have invested early, drawing criticism in the press. “For it to be characterized as a Trump program for his friends is a political hatchet job,” says Jim Sorenson, founder of Catalyst Opportunity Fund, a private equity firm that invests in real estate in opportunity zones. Glickman is clear that luxury housing projects, which would have cropped up regardless, are not wins — but he also argues people are missing the forest for the trees.
Nobody quite knows how to measure whether the program hits its mark, as original reporting requirements were stripped from the final legislation. Sorenson’s firm developed a scorecard assessing factors like a developer’s level of engagement with local residents, housing affordability and displacement, and sustainability. “Those of us who want to be good stewards of this financial tool are going to have to work extra hard to make sure that we see some thoughtful, even, urban, suburban and rural development that meets the spirit of the law,” Benjamin says.
People in the U.K., South Korea and Australia — places with similar economic and political inequities, Glickman says — have reached out to learn more about the program, with an eye on how it plays out in the United States first. Domestically, Glickman says he advises impact-driven investors who align with the spirit of the program (he hasn’t personally invested in development projects).
While Glickman could perhaps pop up in future Democratic administrations, for now he’s busy fortifying this bridge between the private and public sectors. And if opportunity zones do become the next venture capital for public impact, it’s a safe bet that he will still be tinkering away on the foundation.