Wed | Jul 24, 2019

Kushner-linked firm targets richer areas in program for poor

Published:Monday | December 17, 2018 | 12:53 AM
Kushner

 

WASHINGTON (AP):

A real estate investment firm co-founded by President Donald Trump's son-in-law and adviser, Jared Kushner, is betting big on the administration's Opportunity Zone tax breaks, but isn't that interested in steering its investors to the poorest, most-downtrodden areas that the program seeks to revitalise.

New York-based Cadre, in which Kushner still holds at least a $25 million passive stake, made it clear to potential investors in recent marketing materials that it doesn't plan to look for development deals in most of those zones because of their "unfavourable growth prospects."

Instead, Cadre says it will target a "small subset" of zones in such cities as Los Angeles, Seattle and Miami where both populations and incomes are already set to rise faster than the national average.

Cadre is a high-profile example of how early investor interest in the program appears focused on the places that need it the least: zones that qualified for the tax breaks despite already drawing substantial investment or are undergoing obvious gentrification.

Among the examples of such zones is a swath of the Upper East Side of Manhattan that includes the top of Fifth Avenue's Museum Mile, where three-bedroom apartments overlooking Central Park sell for $4 million. Another is Ledroit Park in the nation's capital, which falls mostly in what real estate blog Curbed has anointed Washington's "most gentrified" ZIP code. Yet another Opportunity Zone includes part of The Willows neighbourhood of Menlo Park, California, less than two miles from Stanford's campus, where the tech boom has driven home prices to $1,500 per square foot, 10 times the national average. The Opportunity Zone, where Amazon put its New York City headquarters in Queens, has a median household income of more than $130,000.

"It's hard to imagine why we should be subsidising that," said Brett Theodos, a researcher whose Urban Institute analysis found nearly one-third of the nation's more than 8,700 Opportunity Zones are showing signs of pre-existing heavy investment. "These investors are not bad people. They are responding to the incentives."

Such is the major criticism of the Investing in Opportunity Act, which became law last December as part of the Republican-sponsored tax overhaul. Promoted by Trump in a White House event this past week, it offers developers potentially millions of dollars in capital gains tax breaks to invest in zones selected by states based on such factors as high poverty and low income.

While the programme highlights an average 32 per cent poverty rate in the zones, it includes a wide range of areas  and allows "contiguous" tracts that might not be low-income but are close enough to distressed areas to qualify.