The Urban Institute’s early research on the Opportunity Zone incentive revealed not only its promise but also the risk that investments made by Opportunity Funds, or funds set up to direct investments in Opportunity Zones, could exacerbate disparities between neighborhoods within regions and cities (Theodos and Meixell 2019). We learned that mission-driven investors, philanthropic leaders, and community advocates were concerned with maximizing the benefit of any support or approvals they might provide to an Opportunity Zone project. Further, each of these stakeholders had mechanisms for encouraging local investment—such as predevelopment and gap financing, grant dollars, endowments, and critical community support—that could be used to steer investors in Opportunity Funds toward certain projects. However, local actors stated that they did not have a way of reliably assessing the community impact of proposed projects.
To address this gap, Urban drew from evidence and expertise across a range of sectors to develop and launch the Opportunity Zone Community Impact Assessment Tool in January 2020. The original tool was launched as a beta test, and Urban collected and analyzed user data to learn more about the types of projects being assessed and eventually launch a revised version with improved functionality and content. Between January 2020 and June 2021, we logged over 600 unique entries into the tool. Users assessed a wide range of project types with varying geographies and budgets. The District of Columbia’s Office of the Deputy Mayor for Planning and Economic Development also used the tool to evaluate eligible investments for the District’s own Opportunity Zone benefits.2
The year the tool was released, 2020, was a transformative year for underinvested communities. The COVID-19 pandemic had disproportionate impacts on Black, Indigenous, Asian American and Pacific Islander, and Latinx communities, and the US saw a wave of protests in response to the murder of George Floyd and other people of color by law enforcement. These events highlighted the need for government at all levels to address long-standing racial inequities and to invest in quality jobs, schools, housing, and services in communities of color. Since 2020, the federal government has provided an unprecedented amount of funding to state and local governments to respond to the pandemic and its economic fallout, and many of these funds can be used to address racial inequities (Boddupalli et al 2021; Airi 2021). However, to address historic and ongoing disinvestment in communities of color and close equity gaps, residents of disinvested communities must have a say in the decisions that shape their communities most directly. And governments, philanthropy, and mission-driven investors need a way to discern which investments can create positive social impact in a community and which might create further disparities or cause harm.
Based on the early research on Opportunity Zones and the events that transpired since the tool was first launched, the Urban Institute began a year-long process to revamp and relaunch the tool with three main objectives: (1) to improve the ability of the tool to support more racially equitable outcomes, (2) to make the tool more user friendly, and (3) to improve its utility across a broader range of projects and places, including those outside of Opportunity Zones. As part of the revamp, we engaged a group of experts with significant knowledge and experience applying racial equity principles to community and economic development projects. We asked them to review the tool’s social impact areas and recommend places where we could add or revise the existing set of questions. We also analyzed user data from the beta testing period and worked with Urban’s Office of Technology and Data Science and user experience staff to design a new tool interface that could improve a user’s experience. Finally, as with the beta testing period, we went through two rounds of intensive testing to ensure that the tool worked as it should.
2 “District of Columbia – Qualified Opportunity Fund Guidance,” Government of the District of Columbia, accessed May 10, 2022, https://ozmarketplace.dc.gov/pages/district-qualified-opportunity-fund-dc-qof.