As Congress Considers Renewal, Can Opportunity Zone Investment Reach More Distressed Areas?
The opportunity zone program has spurred tens of billions of dollars in investment since its inception, but critics say it hasn’t done enough for the low-income and rural communities that need it most.
The tax incentive program, created as part of President Donald Trump’s Tax Cuts and Jobs Act of 2017 to steer investment toward economically distressed communities, has helped finance multifamily development in many markets facing housing shortages.
But the bulk of that development has occurred in urban areas and neighborhoods that were already experiencing growth — according to reports from at least three organizations that have studied the program — not the underserved areas it was designed to help.

A proposal to renew the program that was included in the House-passed tax bill aims to address that disparity by narrowing the eligible zones to lower-income communities and boosting the program’s tax benefits for rural areas.
However, some economic development researchers worry the changes still might not be enough to spur new growth in areas that weren’t already attracting investment, and that it would provide billions in tax breaks for investors that don't need them.
"The 1.0 version of the program has not [provided] adequate community benefit in disinvested places to justify spending billions of dollars again doing essentially the same thing," Urban Institute Senior Fellow Brett Theodos said. "We would need a fundamental retooling of the program in a number of ways to see it worth the money that we're spending on it."
Thursday morning, the House of Representatives passed President Donald Trump's "big, beautiful" tax bill with a one-vote margin. The bill now heads to the Senate, and House Speaker Mike Johnson said he hopes it will reach Trump's desk by July 4.
The bill includes provisions introduced May 12 by the House Ways and Means Committee to renew and reform the opportunity zone program, which is set to expire next year.
A key aspect of the changes is that they would lead states to redraw their opportunity zone maps with narrower qualifications for what areas are eligible.
The proposal would lower the income threshold for census tracts to qualify as opportunity zones, and it would remove a provision that allowed tracts adjacent to low-income areas to qualify. It would also require that one-third of the new census tracts be rural areas, and it would triple the tax benefit in those areas.
The 1,100-page bill that passed the House appears to include all of the same provisions as the draft that came out of the committee, said John Lettieri, CEO of Economic Innovation Group. EIG, a think tank that published a 2015 white paper that inspired the initial opportunity zone legislation, has continued to support the program and study its benefits.
The organization has highlighted the program’s impact on boosting much-needed housing production: a March EIG report found that OZ census tracts added 313,000 residential units between the third quarter of 2019 and the same quarter of 2024, outpacing housing development in non-qualified census tracts.

"One of the standout outcomes of opportunity zones so far has been helping to tackle the national housing crisis," Lettieri said. "We found that it essentially doubled the amount of new housing going into designated communities over a five-year period after implementation."
Other organizations that have been more critical of the program’s effectiveness agree it has spurred housing production, but they raise issues with where that production has occurred.
An Urban Institute post this month cited research showing 75% of the investment in the program went to the top one-fifth of zones with the most overall commercial investment. It also said 93% went into urban metropolitan regions rather than rural areas, and the zones with higher incomes and educational attainment received more investment.
The National Community Reinvestment Coalition tracked the overlap between opportunity zones and gentrified communities — which it measured using socioeconomic data on income, home values and education levels — and found 17% of the urban OZs overlapped with gentrified areas in 2020.
"We're very concerned about this kind of overlap, and that the money is actually going into areas that may be less distressed than in other areas that were designated," NCRC Principal Researcher Bruce Mitchell said.

The reason the OZ program has struggled to draw new investment to lower-income rural areas, several expert sources said, is investors still gravitate toward deals where they see the highest potential return on investment.
"Rural areas — largely, though not all — have not been growing areas in terms of population, in terms of economies," Theodos said.
Because of this, he said he doesn’t think the proposed changes to the program would have a widespread impact on rural communities.
"A project in a rural area has to make economic sense even apart from getting opportunity zone equity in the deal," Theodos said. "Will more rural OZ projects happen if this goes ahead? Yes. Will it be a meaningful share of the program's benefits? I don't anticipate that."
Jill Homan, president of opportunity zone-focused investment manager Javelin 19 Investments, said it has been hard to do real estate deals that provide a strong ROI in the most distressed areas.
She said she is “really encouraged” by the House proposal’s focus on rural areas, and the boosted tax benefits would be a good start, but she thinks more needs to be done if the government wants to help rural areas catch up to their urban and suburban counterparts.
"If we're not getting the outcome that we want in terms of uplifting communities in rural America, what I'm suggesting is it might be less of a 'There weren't enough rural zones made,' and more of a 'Hey, let's look at why the capital isn't going there and look at how we can make it easier to make capital go into rural America,'" Homan said.
Donna Gambrell, CEO of Appalachian Community Capital, said the program has created some positive impacts for the region. The community development financial institution's Opportunity Appalachia program has supported 86 projects in six states by raising over $700M in financing.

But Gambrell said it has always been hard to get investors to come into the Appalachian region, which is one of the most economically distressed in the country and is heavily reliant on federal funding for new investment.
“Whenever you’re talking about raising capital or obtaining investments, particularly for this region, it can be challenging and it can be hard, but that doesn’t mean that people totally step away from it,” Gambrell said.
One of the ways the OZ program was designed to spur growth in distressed areas was to provide tax benefits for investing in operating businesses that can expand and create jobs — not just real estate projects that need market demand in order to work. But reports from Novogradac show the vast majority of the investment has gone to real estate projects.
Lettieri said he hopes the program can be amended to spur more investment into non-real estate operating businesses this time around.
"The way that OZ 1.0 was implemented, there's some really disadvantageous features that make it more challenging than it should be to use the OZ incentive for non-real estate operating businesses," he said.
NCRC's Mitchell said he still thinks the program has the potential to benefit lower-income and rural communities given how much capital OZ funds have raised, and he thinks the House program has some smart ideas to funnel that capital toward the places that need it. He highlighted its proposal to lower the income threshold for qualified opportunity zone census tracts from 80% of the larger area’s median income to 70%.
“That's a good move, and we'd like to see a continuation of that, so that areas where there are indications of gentrification, that there be some scrutiny of those,” he said.
Gambrell said she is pleased by the proposed extension and the changes to the program in the House bill. She said she hopes it will help attract more investors to the Appalachian region so her firm can do more deals in opportunity zones.
"I’m just hoping that it gives us greater ammunition to highlight the benefits and incentives that are rewarded once you make that decision to actually do work, make contributions and make investments in this region," Gambrell said.