New Orleans • President Donald Trump has portrayed U.S. cities as wastelands, ravaged by crime and homelessness, infested by rats.

But the Trump administration’s signature plan to lift them — a multibillion-dollar tax break that is supposed to help low-income areas — has fueled a wave of developments financed by and built for the wealthiest Americans.

Among the early beneficiaries of the tax incentive are billionaire financiers like Leon Cooperman and business magnates like Sidney Kohl — and Trump’s family members and advisers.

Former Gov. Chris Christie of New Jersey; Richard LeFrak, a New York real estate titan who is close to the president; Anthony Scaramucci, a former White House aide who recently had a falling out with Trump; and the family of Jared Kushner, Trump’s son-in-law and senior adviser, all are looking to profit from what is shaping up to be a once-in-a-generation bonanza for elite investors.

The stated goal of the tax benefit — tucked into the Republicans’ 2017 tax-cut legislation — was to coax investors to pump cash into poor neighborhoods, known as opportunity zones, leading to new housing, businesses and jobs.

The initiative allows people to sell stocks or other investments and delay capital gains taxes for years — as long as they plow the proceeds into projects in federally certified opportunity zones. Any profits from those projects can avoid federal taxes altogether.

“Opportunity zones, hottest thing going, providing massive new incentives for investment and job creation in distressed communities,” Trump declared at a recent rally in Cincinnati.

Instead, billions of untaxed investment profits are beginning to pour into high-end apartment buildings and hotels, storage facilities that employ only a handful of workers, and student housing in bustling college towns, among other projects.

Many of the projects that will enjoy special tax status were underway long before the opportunity zone provision was enacted. Financial institutions are boasting about the tax savings that await those who invest in real estate in affluent neighborhoods.

Scaramucci’s development in New Orleans offers a portrait of how the tax break works. His investment company, SkyBridge Capital, is using the so-called opportunity zone initiative to help build a hotel, outfitted with an opulent restaurant and a rooftop pool, in the city’s trendy Warehouse District.

The tax benefit also is helping finance the construction of a 46-story, glass-wrapped apartment tower — amenities include a yoga lawn and a pool surrounded by cabanas and daybeds — in a Houston neighborhood already brimming with new projects aimed at the wealthy.

And in Miami’s hot Design District, where commercial real estate prices have nearly tripled in the last decade, the tax break is set to be used for a ritzy new office tower with a landscaped roof terrace.

Some proponents of opportunity zones note that money is already flowing into downtrodden communities like Birmingham, Alabama, and Erie, Pennsylvania. They argue that more funds will follow.

But leaders of groups that work in cities and rural areas to combat poverty say they are disappointed with how it is playing out so far.

“Perhaps 95% of this is doing no good for people we care about,” said Aaron T. Seybert, social investment officer at the Kresge Foundation, a community development group in Troy, Michigan, that supported the opportunity zone effort.

A Tax Break Is Born

The opportunity zone tax break was targeted at the trillions of dollars of capital gains held by rich Americans and their companies: profits from investments in the stock market, real estate and other businesses, even short-term trades by hedge funds. When investors sell those assets, they can incur tax bills of up to 41%.

Sean Parker, an early backer of Facebook, helped come up with the idea of pairing a capital gains tax break with an incentive to invest in distressed neighborhoods.

Starting in 2013, Parker bankrolled a Capitol Hill lobbying effort to pitch the idea to members of Congress.

The plan won the support of Sens. Cory Booker, D-N.J., and Tim Scott, R-S.C. When Congress, at Trump’s urging, began discussing major changes to the federal tax code in 2017, Parker’s idea had a chance to become reality.

Confined to six pages in the 185-page tax bill, the provision can significantly increase the profits investors reap on real estate and other transactions.

It allows investors to defer for up to seven years any capital gains taxes on the money they invest in opportunity zones. (That deferral is valuable because it allows people to invest a larger sum upfront, potentially generating more profits over time.) After 10 years, the investor can cash out — by selling the opportunity zone real estate, for example — and not owe any taxes on the profits.

Over a decade, those dual incentives could increase an investor’s returns by 70%, according to an analysis by Novogradac, an accounting firm.

The opportunity zones, focused on low-income census tracts, were drawn by officials in each state, as well as in Washington and Puerto Rico. Last year, the Treasury Department approved roughly 8,800 such zones.

Nearly a third of the 31 million people who live in the zones are considered poor — almost double the national poverty rate. Yet there are plenty of affluent areas inside those poor census tracts. And, as investors would soon realize, some of the zones were not low income at all.

The Middle Man

The Harvard Club of New York City, in midtown Manhattan, is the embodiment of America’s old-money elite.

One recent morning, financial advisers representing several dozen of America’s richest dynasties crowded into a drab meeting room on the club’s third floor.

The advisers were there to see Daniel Kowalski, a top aide to Treasury Secretary Steven Mnuchin and the Trump administration’s point person for the opportunity zone rules.

Kowalski was an aide to the Trump campaign.

At the Harvard Club, he dived into an explanation of how opportunity zones work — and for whom they work. “The audience for opportunity zones is inherently fairly small because it’s limited to capital gains income, which is why I wanted to come and talk to this group,” he told the room of advisers.

That audience is small indeed: Only 7% of Americans report taxable capital gains, and nearly two-thirds of that income was reported by people with a total annual income of $1 million or more, according to IRS data.

Yet this is a vital constituency, since the success of the opportunity zone program will hinge largely on how much money investors kick in. That is why the Trump administration — and Kowalski in particular — is promoting the tax break on Wall Street.

More than 200 opportunity zone funds have been established by banks like Goldman Sachs and major real estate companies, including CIM Group of Los Angeles, which has previously been a partner with the Trump and Kushner families on projects.

The law does not require public disclosure of who are taking advantage of the initiative or how they are deploying their funds.

Luxury Hotels, Abandoned Homes

Backers of the opportunity zone program say luxury projects are the easiest to finance, which is why those have been happening first. Over the long run, they say, those deals will be eclipsed by ones that produce social benefits in low-income areas.

At least some struggling neighborhoods are already starting to receive investments.

In Birmingham, for example, a developer is using opportunity zone funds to convert a building, vacant for decades, into 140 apartments primarily aimed at the local workforce.

“We are seeing projects that are being announced here in Alabama that would not have happened otherwise,” said Alex Flachsbart, founder of Opportunity Alabama, which is trying to steer investors to economically struggling neighborhoods.

Similar projects are getting underway in Erie, Cleveland and Charlottesville, Virginia. Goldman Sachs is using some of its capital gains — profits on the company’s own investments — in opportunity zones, including $364 million for mixed-income housing developments in Salt Lake City, Baltimore and other cities.

But even supporters of the initiative agree that the bulk of the opportunity zone money is going to places that do not need the help, while many poorer communities are so far empty-handed.

Some opportunity zones that were classified as low income based on census data from several years ago have since gentrified. Others that remain poor overall have large numbers of wealthy households.

And nearly 200 of the 8,800 federally designated opportunity zones are adjacent to poor areas but are not themselves considered low income.

Under the law, up to 5% of the zones did not need to be poor. The idea was to enable governors to draw opportunity zones in ways that would include projects or businesses just outside poor census tracts, potentially creating jobs for low-income people. In addition, states could designate whole sections of cities or rural areas that would be targeted for investment, including some higher-income census tracts.

In some cases, developers have lobbied state officials to include specific plots of land inside opportunity zones.

In Miami, for example, LeFrak — who donated nearly $500,000 to Trump’s campaign and inauguration and is personally close to the president — is working with a Florida partner on a 183-acre project that is set to include 12 residential towers and eight football fields’ worth of retail and commercial space.

In spring 2018, as they planned the so-called Sole Mia project, LeFrak’s executives encouraged city officials in North Miami to nominate the area around the site as an opportunity zone, according to Larry Spring, the city manager. They did so, and the Treasury Department made the designation official.

The Warehouse District of New Orleans is one of the city’s trendiest neighborhoods. It includes some of the area’s hottest restaurants. Boutique hotels spill well-heeled tourists onto the red brick sidewalks.

And it is getting hotter. The sounds of heavy-duty equipment heaving steel or pouring cement are audible across the neighborhood.

In other words, in a city grappling with acute poverty, this is not a neighborhood that especially needs a generous new tax break to lure luxury lodging. Yet state officials have established an opportunity zone here.

Less than two miles away is the poorest opportunity zone in Louisiana — and one of the poorest nationwide. The zone includes the Hoffman Triangle neighborhood, where the average household earns less than $15,000 per year. Block after block, streets are lined with dilapidated, narrow homes, many of them boarded up.

City officials, including the head of economic development for New Orleans, said they were not aware of any opportunity zone projects in this neighborhood.

Terrance Ross, a construction worker who has lived in the area for 20 years, is familiar with the building boom underway in the Warehouse District.

“Why is the federal government putting money where money is already accumulating?” he asked. “This neighborhood just needs some tender loving care.”

Similar scenes are playing out in opportunity zones across the United States: The federal government is subsidizing luxury developments — often within walking distance of economically distressed communities — that were in the works before Trump was even elected president.