Study: New Markets Tax Credit 'Does What it Promises, Most of the Time'

The program, which gives tax credits to investors, has resulted in added jobs, increased incomes, and low rates of displacement.

May 12, 2021, 10:00 AM PDT

By Diana Ionescu @aworkoffiction


Washington D.C. COnstruction

Tim Evanson / Flickr

Oscar Perry Abello reports on new research from the Urban Institute that analyzes the effects of the federal New Markets Tax Credit (NMTC), a program established in 2000 that "provides an incentive for investment in low-income communities." According to the Tax Policy Center, "NMTC investors provide capital to community development entities (CDEs), and in exchange are awarded credits against their federal tax obligations." The study, which looked at 5,746 investments in the program's first round, "finds the New Markets Tax Credit program does what it promises, most of the time, and doesn’t seem to cause displacement in the way that many fear the newer Opportunity Zones tax incentives may." 

Between 2001 and 2017, investors—mainly large banks—received $12.2 billion in tax credits, which translated into $107 billion in total investment. In terms of uses, retail projects proved most popular with 17% of projects. "Manufacturing and food processing projects came in next, at 828 investments, followed by 719 office or professional service projects, 619 health care facilities projects, and 600 school and child care projects. The rarest were investments into financial intermediaries that serve low-to-moderate income communities, like Hope Credit Union." 

The type of project can dictate the number and quality of jobs created, as well as the project's impact on the broader community. "Hope Credit Union used New Markets Tax Credits to grow during the Great Recession, going from less than ten branches to nearly 30 across the Deep South — creating or preserving a good number of jobs internally, but also having an even larger indirect impact by preserving access to credit in many communities that lost all other banking providers." The study also found an average of "17.7 new firms and 100 new jobs" in census tracts with NMTC projects and "a $562 increase in median incomes for some census tracts." The research showed little displacement in NMTC neighborhoods, with "only a modest increase in the turnover rate."

To implement similarly successful programs, the researchers recommend a "rigorous process to certify eligible projects" and "sizing incentives based on potential impact, as opposed to tying incentives to potential rise in property values–as is the case with Opportunity Zones."

Tuesday, May 4, 2021 in Next City

Indian Trail, North Carolina

Four ‘Low-Hanging Fruit’ Zoning Reforms

An excerpt from the latest book on zoning argues for four approaches to reform that can immediately improve land use regulation in the United States.

June 26, 2022 - M. Nolan Gray

Car Traffic

San Francisco Just Ended Single-Family Zoning

The San Francisco Board of Supervisors voted to Tuesday to eliminate single-family zoning, but pro-development advocates say additional changes are needed to unleash a wave of construction.

June 29, 2022 - San Francisco Chronicle

Rent

U.S. Rental Market Crosses a New Threshold of Affordability

In a first for the country's rental market, most U.S. apartments are asking for more than $2,000 to rent, according to data recently published by Redfin.

June 21, 2022 - Redfin

New Jersey Power Plant

Supreme Court Guts the U.S. EPA’s Ability to Limit Carbon Emissions

The consequences of this ruling have long been foretold. With the U.S. Environmental Protection Agency now officially barred from the fight against climate change, Congress will have to act to reduce carbon emissions.

June 30 - Yahoo News

Central Los Angeles

California Approves Revised Los Angeles Housing Element

State officials officially approved the city’s housing plan, which was initially rejected for not doing enough to enhance housing equity.

June 30 - Urbanize LA

A fly fisher casts on a fog-covered river.

Lawsuit Could Open Public Access to Colorado Rivers

Colorado is one of few U.S. states that has decided that private property owners supersede the public when it comes to access to rivers and streams.

June 30 - High Country News

New Updates on The Edge

HUD's Office of Policy Development and Research

International Real Estate Strategies and Deal Negotiation

Harvard Graduate School of Design Executive Education

Affordable Housing: Principles for Changing Domestic and Global Markets

Harvard Graduate School of Design Executive Education

Urban Design for Planners 1: Software Tools

This six-course series explores essential urban design concepts using open source software and equips planners with the tools they need to participate fully in the urban design process.

Hand Drawing Master Plans

This course aims to provide an introduction into Urban Design Sketching focused on how to hand draw master plans using a mix of colored markers.