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Comment by adamhooper | Hacker News Reader

Close - but Bob in your example also has to improve the basis of whatever he buys by 100% within a 30 month period. So that could be a major renovation of the house, building another unit on the property, scraping and rebuilding etc.

Unfortunately it's not as easy as parking money and riding off into the tax free sunset. As I mentioned down thread, we should hopefully have the first set of regs from Treasury even as soon as tomorrow which will clarify a lot of the loose ends as written in the initial legislation.

Some of what we're waiting to see is whether or not that basis improvement includes the land value or if you can split that out. If the home Bob purchases for $300k is on a lot worth $250k, does he have to spend the full $300k to improve it, or just $50k to improve the basis of the structure?

Lots of details to still work out but hopefully we'll know more shortly.

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Isn't that kinda a value-neutral proposition for the area though? Yes, there's a nicer house or whatever now, but 100% of the value add goes to the person who is now going to sell the property and get their investment back with change. The area ends up with the same effective wealth, since they have to send money to the out of state investors to claim ownership over the renovated house or whatever.

(also that assumes the people ever sell it to someone in the area - if we're talking real estate, there's no reason for them to not just sit on it forever and turn it into a rental or Airbnb or whatever)

Increases the tax base.

The benefits are not purely monetary - raising the quality of an area due to investment that otherwise would never come in is an enormous benefit for people already living there.

That isn't too say throwing money at a bad neighborhood is guaranteed to succeed but it gives a far better shot than letting the area simmer in stagnation.

I don’t think most people living in these “opportunity zones” are going to be happy with people basically being tax incentivized to make housing more expensive in the area in which they live, thus making life harder for them.

AFAICT this is basically incentivizing gentrification.

all of the above.

If you improve a mansion to be a fancier mansion, you don't increase the supply of housing.

If you improve a small lot to be a duplex or an apartment complex, you increase the supply of housing.

The latter wouldn't raise the net price of housing, but would still be a worthwhile investment. It depends on what local policy is, namely if building new housing is illegal or not.

Making one house fancier definitely increases rents on neighboring properties. If I live in a rundown house in a nice neighborhood and fix it up, everyone else's house increases in value. Same goes for making 1 house really nice in a bad area.

It is complex and there are many "it depends". If they own a house and want to move [for some personal reason] they will be happy that they can get more for their house. If they have lived there for years and watched the neighborhood go downhill they may be happy that things are improving again. Of course the other side is if they are happy with cheap rent they will be unhappy if rent increases because there is now more demand.

No, because it ends up increasing property values for existing owners.

"Wealth grows wherever men exert energy," Arkad replied. "If a rich man builds him a new palace, is the gold he pays out gone? No, the brickmaker has part of it and the laborer has part of it, and the artist has part of it. And everyone who labors upon the house has part of it Yet when the palace is completed, is it not worth all it cost? And is the ground upon which it stands not worth more because it is there? And is the ground that adjoins it not worth more because it is there? Wealth grows in magic ways. No man can prophesy the limit of it. Have not the Phoenicians built great cities on barren coasts with the wealth that comes from their ships of commerce on the seas?"

-- The Richest Man in Babylon

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