Philadelphia Colleges Are Using Trump’s Opportunity Zones to Speed Up Gentrification

The West Philadelphia neighborhood of Mantua, where more than 1 in 5 buildings and lots stand vacant, seems like a classic picture of an economically distressed community. The median income is about $21,000, right at the poverty line for an average-sized family, and nearly 90 percent of neighborhood residents are Black. The community has been designated an opportunity zone, a program introduced by the Trump Administration in 2017 that allowed developers to avoid or reduce capital gains taxes as an incentive to invest in neighborhoods like Mantua.

President Trump describes the opportunity zone program as a prime example of how his administration has helped African Americans. This June, Trump claimed that since 2017 “countless jobs and $100 billion of new investment, not government investment, have poured into 9,000 of our most distressed neighborhoods anywhere in the country.” Opportunity zones have also been talked up by the few prominent African American Trump allies, including Sen. Tim Scott (one of the bill’s original co-sponsors) and HUD Secretary Ben Carson. Scott called opportunity zones “the first new, major effort to tackle poverty in a generation.”

Yet the program has been troubled since the beginning. Governors were permitted to select their state’s opportunity zones, with few criteria: 95 percent of the zones had to have a 20 percent poverty rate or a median income that is 80 percent or less of the metro area’s median income. Governors could also designate five percent of the zones in areas that are not low income. That latitude resulted in developments ranging from luxury apartment buildings to a ”superyacht” club being designated as eligible for opportunity zone tax breaks. Reporting from the New York Times, ProPublica and other news outlets revealed that friends and relatives of the president — including son-in-law Jared Kushner — stood to benefit from the opportunity zone tax break, and Treasury is already conducting a corruption investigation.

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Governors looking to tout the success of opportunity zones in their state had incentives to pick areas with development projects already planned or underway — such as areas adjacent to or including a college or university. Adam Looney, a senior fellow at the Brookings Institute, found 33 opportunity zones in areas where 85 percent or more of the population are enrolled in college. The zones meet the low-income threshold, but that’s because students don’t typically earn much while taking classes.

Designating these areas as opportunity zones because of students’ lack of income is a cynical use of an antipoverty program. Universities have been creating pockets of wealth near their campuses for decades, driving up rents without benefitting the long term residents who will remain long after each class graduates.

The average selling price of a home rose from $78,500 in 1995 to half a million dollars by 2018

In West Philadelphia, for instance, real estate investment in areas near universities has already changed the face of the historically African American neighborhood. West Philly is home to the University of Pennsylvania and Drexel University. The University of Pennsylvania lured professors and students to the area with tactics that ranged from installing streetlights to offering low-interest loans to encourage faculty to buy in the area, and even created a new public elementary school to offer an option for an elite education in the neighborhood. Their tactics were so successful that the average selling price of a home rose from $78,500 in 1995 to half a million dollars by 2018. Drexel is now borrowing directly from Penn’s playbook, including building a new public middle school.

Drexel is just one of the 33 universities mentioned in the Brookings report. In the opportunity zone that includes Drexel, the poverty rate is 66 percent and 88 percent of residents are enrolled in college full time. Those statistics are reflected in college towns selected as opportunity zones across the country. The University of Southern California, surrounded by a historically low-income area of Los Angeles, is located in an opportunity zone with a poverty rate of 88 percent. A whopping 99 percent of residents, however, are full time college students. College students at small private universities (such as Liberty College) and behemoth public institutions alike (such as Texas A&M) are making their towns and neighborhoods eligible for a designation intended to help areas that have struggled with generational poverty.

Mantua and Drexel’s campus are in the same opportunity zone. A $43 million project dubbed the Village Square on Haverford got the go-ahead from the city in late 2019. It will bring 166 new apartments and townhomes to the opportunity zone in Mantua, with 80 units flagged as “workforce housing” with their selling price capped $230,000. That’s significantly higher than Philadelphia’s average home sale price of $188,000, and well out of reach for Mantua residents, whose income is less than half of the city’s median. The development will include 32 rental units of affordable housing, though there has been no word as yet about what definition of affordable the developers will use. The new development is located just a few blocks away from an off-campus housing complex marketed to students at Penn and Drexel.

Mantua residents have organized to have a say in how their neighborhood changes. They settled on a push to rezone most of the neighborhood as single-family housing, which they intended to prevent developers from buying up blocks of Mantua and converting the area into student housing for Drexel. They were successful, but the rezoning may not pay off in the long term. “It’s really a conundrum for the community to be in,” Wright said. “Multifamily [zoning] could potentially create naturally occurring affordable housing in the neighborhood because you can have apartments that might be available to lower-income or moderate-income people.” Focusing on protecting single-family homes means fewer available rentals — and higher rents.

That’s a problem, because people in the rental market may be the most vulnerable to changes in the housing market, according to sociologist Susan Clampet-Lundquist, professor at Philadelphia’s St. Joseph’s University and University City resident. Overall, changing neighborhoods are a mixed bag for longtime residents. The changes do bring more amenities to the area. The Village Square on Haverford, for instance, will include a supermarket and a coffee shop. Homeowners will likely see the values of their property go up. But the story is different for renters. When people leave a rental, they are unlikely to find another unit at a similar monthly cost and may have to leave the neighborhood, a process of indirect displacement.

“To me, the most important part is indirect displacement, a reduction in affordable housing,” said Clampet-Lundquist. “That creates the demographic change that you end up seeing.”

Mantua residents aren’t necessarily opposed to college students in the neighborhood, Wright said. They don’t begrudge the developers now showing up because they will turn a profit. They just want to make sure they can stay in their homes and enjoy the benefits of those changes, too.

Politicians ranging from Alexandra Ocasio-Cortez to Joe Biden have proposed changes to opportunity zones, from defunding the program (AOC) to reforming it (Biden). Biden’s reform plans don’t include specific housing protections for people in opportunity zones such as Mantua. And existing local and federal programs could help with this particular problem, including rent control, Section 8 housing vouchers, and assistance programs for long-term residents that subsidize the inevitable rise in property taxes, Clampet-Lundquist said.

Using these programs to help in cities where opportunity zones meet skyrocketing real estate prices could limit the damage to low-income areas. So would an acknowledgment that incentives designed to maximize return on investment for the wealthy may not be the best way to address poverty.

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