Opportunity zone program
Opportunity zone program is a vehicle used to provide investment in projects that are conducted in one of the many designated zones nationwide.
Use this arc gis maptool to see where Op Zones are
The Opportunity Zones (OZ) program is a federal tax incentive initiative established by the 2017 Tax Cuts and Jobs Act to stimulate private investment in low-income communities across the United States.
The program designates specific census tracts, known as Qualified Opportunity Zones (QOZ), as areas eligible for preferential tax treatment for investors who channel capital gains into these regions.
A key feature of the program is that investors can defer paying federal capital gains taxes on reinvested gains until December 31, 2026, and can potentially eliminate up to 100% of the tax on those gains if the investment is held for at least ten years.
For real estate, the program is particularly focused on new construction and substantial rehabilitation of properties, ensuring that funds are used to improve the designated areas rather than simply acquiring existing assets.
To qualify, an Opportunity Fund—defined as a partnership or corporation investing at least 90% of its assets in OZ property—must either build new structures or significantly upgrade existing ones. The requirement for "substantial improvement" means the fund must invest an amount equal to or greater than the initial purchase price of the building (not the land) into improvements within a 30-month period. This rule was clarified by a recent regulatory ruling, which specifies that the investment threshold applies only to the building's cost, not the land's value.
The program has become a dominant strategy for multifamily real estate development, driven by a nationwide housing shortage and strong demand for new rental units.
Developers like Altes Capital focus on building new multifamily and mixed-use projects in high-growth, high-demand markets, often incorporating workforce housing and sustainability features. For example, Altes Capital is developing a car-free residential community in Tempe, Arizona, and a net-zero carbon multifamily building in Washington, DC, both of which are designed to be walkable, amenity-rich, and environmentally sustainable. These projects are part of a broader trend where Opportunity Zone investments are used to increase the supply of multi-family housing, which can help moderate rental costs and revitalize distressed neighborhoods.
The impact of the program on new home builds is evident in the data. A 2022 study found that OZ designation significantly increased the likelihood of new residential and commercial development, with a 20% rise in the probability of development activity in designated urban communities.
This effect is particularly strong in areas with available land and in-fill opportunities, where new construction can be more easily implemented. The permanence of the program, now extended through the OBBBA (Omnibus Budget and Reconciliation Act), allows real estate firms to integrate OZ planning into long-term investment strategies, treating these zones as a core component of their location and development planning.
In addition to new construction, the program supports mixed-use developments that combine residential, retail, and office space, helping to revitalize downtowns and waterfront areas.
For instance, a project in San Antonio leveraged OZ designation to attract over $100 million in private investment, resulting in the creation of new housing units, a grocery store in a food desert, and commercial space. These developments not only generate economic activity but also contribute to neighborhood revitalization over time, although the full benefits, such as poverty reduction, are realized gradually as new investments activate the local economy.
Investors must use a Qualified Opportunity Fund (QOF) to access the tax benefits, and the fund must meet strict asset tests, being required to hold at least 90% of its assets in OZ property, with compliance verified twice annually by the IRS.
This is a list of funds available for the current program. A new program starts in 2027.
https://www.novoco.com/resource-centers/opportunity-zones-resource-center/opportunity-funds-listing
Each year at Tax filing every person or corporation with capital gains tax to pay has 180 days to invest in a fund. Funds can be created by anyone.
Another list with fund amounts