The other day I took a tour of Portland’s Ritz Carlton, the 35-story, five-star hotel and condo to be completed next spring. The condo units, on the upper floors, are selling from $1.3 million for one-bedrooms to $10 million for penthouses. How my friend got on the invite list, she doesn’t know, but she invited me along.

Marketing, our hosts said, is aimed at aging boomers who want to add a downtown residence to their places to hang, hotel accommodations they own rather than rent. (The condo fee is $1-1.10 per foot—say $2500 for a 2400-square-foot two bedroom.) The other market is DINKs (double-income-no-kids) who want a little flash and a lot of amenities. As a sales “ambassador” told us, “people who’ve made it and want to show it.” Sixteen of 138 units have sold.

I’ve been following the Ritz story for three years (and wrote about it then), because its owners are beneficiaries of the signature accomplishment of the GOP Congress during Donald Trump’s first two years. While researching testimony I gave to the Oregon legislature in 2020, I obtained an investment prospectus.

The 2017 “Trump tax bill” featured a provision known as “Opportunity Zones,” the latest iteration of a 30-year-old idea that emerged during the Bush pere administration (which I covered as a tax policy reporter). The idea was that, given sufficient tax incentives, wealthy investors would erase poverty by lifting downtrodden areas with new developments. The reality was something different, as the right-wing Heritage Foundation found in a 2019 study:

“Academic and government studies consistently show place-based development programs fail to increase employment, raise wages, or advance general economic opportunity for targeted residents because they have not addressed the main causes of poverty.”

Yeah, well, alleviating poverty was the pitch, but that’s not what Opportunity Zones are about. They’re about giving the rich tax-free investments. They do so through “Opportunity Funds,” whose managers scour the nation’s 8700 “Opportunity Zones,” census tracts so designated because they met certain poverty criteria. Investors can sell assets, put the money in these funds and delay paying discounted capital gain tax on their old investments for years, then pay nothing on gains from the new investments if held 10 years.

Thus, only rich people can play. Minimum investment is typically six figures.

These new investments work only if the 10-year after-tax returns are greater than investments that don’t have the tax advantages. So investors are drawn only to sure-win projects in downtowns where land is tight. Portland (at least before the pandemic) was such a place. Opportunity Funds invested in New York City, Atlanta, Dallas, L.A., Seattle—you get the idea (research shows that’s where the money has gone). Places that were expensive and guaranteed to get more so, with returns better than the typical 10-12% appreciation of other real estate assets.

Winners and losers

If you owned chunks of land in these and other cities, Opportunity Fund managers came calling. That’s what happened in Portland, where a family real estate business, Downtown Development Group, owns many tracts. One of them was “Block 216,” otherwise vacant land leased to about 50 food carts, small businesses that are incubators for the city’s riotously creative food scene.

In this case, the Ritz project was organized in 2016. Because Congress attached few rules, and because the Trump Treasury Department was run by rent-seekers looking to increase wealth for themselves and associates rather than prevent abuse, the Ritz project was able to reorganize into a new entity in 2019 so that investors could take advantage of the tax benefits.

Who won? The Goodmans, who own the land, which suddenly was of greater value than it had been before Congress bestowed tax benefits; the investors, who stood to receive those tax benefits; and the fund managers, who took their piece.

Who lost? The food cart owners, employees, and customers. Also other renters—business owners and residents—who will find themselves priced out of a more expensive downtown because Congress gave the land greater value.

This is Portland’s trade: out go quirky, bar-going, cart-patronizing lower-rent folk; in come millionaires who don’t have to leave the premises for anything. The Ritz will have an eighth-floor deck, an “owners lounge” where you can gather with your neighbors to make business deals (this was part of the pitch). You can walk your lap dog there and never have to hit the street. Similar projects are on the way.

Opportunity Zones are set to expire at the end of 2026, meaning new investors have until then to take advantage of their tax benefits. Expect an extension to be part of some must-pass legislative vehicle if Republicans retake Congress.