Money Is Still Trickling Into Opportunity Zone Funds, But Program Extension Could Unleash A Flood

While President Donald Trump has remained quiet on the future of the opportunity zone program — one of the most significant economic development tools passed during his first term — developers are still raising money to deploy through the program and see more capital waiting on the sidelines.

Created with Trump's 2017 Tax Cuts and Jobs Act, the opportunity zone program is a tax break for investing in businesses and real estate projects in economically distressed areas. Key portions of the program are set to sunset next year, but OZ investors are still pooling funds with the expectation that it will be extended.

In the first quarter of this year, opportunity zone funds that Novogradac tracks raised $810M in equity — below the peak levels of 2021 but representing the second-largest quarterly raise since mid-2023.

Executives with Redbrick LMD and Jackson Dearborn who are raising money for OZ funds said they see the fundraising market this year as relatively slow, and they think the floodgates won’t fully open until the program is extended.

"A lot of people are paying attention to what opportunity zones 2.0 could look like so that they are ready for their clients, their customers, their own investment accounts," Redbrick Managing Partner Louis Dubin said.

Across the country, 8,764 census tracts are designated as opportunity zones. More than $40B has been raised since the program’s inception across the 2,047 qualified opportunity zone funds that Novogradac tracks, though Novogradac partner Jason Watkins said its data doesn’t capture the full market and the total figure is likely much higher.

Of this money, the majority has been invested into multifamily development, with Novogradac estimating more than 199,000 homes have been financed through the tax incentive.

After Trump won the election in November and nominated Scott Turner — who previously led the program’s implementation — as secretary of housing and urban development, opportunity zone supporters celebrated a likely extension of the program.

But the administration has been quiet on its plans since then, as Trump’s policy actions during his first 100 days focused on tariffs, federal agency cuts and an immigration crackdown. 

Now, Congress is crafting a wide-ranging budget and tax cut bill that it aims to pass through the reconciliation process, and opportunity zone supporters see that as the likely vehicle to extend the program. Speaker of the House Mike Johnson set a goal of passing the bill by Memorial Day, though he has acknowledged that is an “ambitious” timeline.

Opportunity zone experts tell Bisnow they expect the bill will pass later in the year, but they are confident it will include an extension of the program. The exact form an extension will take remains uncertain, as a variety of reforms to the program have been proposed.

"I'm on the phone every day all day talking about what an opportunity zone 2.0 could look like," Watkins said. "I think the excitement is certainly starting to bubble, and I think that's probably leading to some additional investment now.

“I'm sure that many investors are taking a wait-and-see approach to see what exactly the new legislation will include,” he added.

The money that investors can deploy into opportunity zone funds must come in the form of capital gains from other investments such as real estate ventures or stock holdings. And they have a 180-day window with which they must invest that gain, which is leading some to put money into the funds now, Dubin said.

“Some of those opportunities are there, but the general market that's looking at this, I think most of the capital is on the sidelines right now, waiting to see what 2.0 is going to look like," Dubin said.

Jackson Dearborn Partners Managing Partner Ryan Tobias, whose firm is raising opportunity zone funds, said part of the reason he sees the market as slow this year is because investors haven’t had as many capital gains to deploy as they have in the past given that the stock market is down.

But he said he has heard discussions around potentially changing the rules with an extension of the program so investors could put any money into OZ funds, not just capital gains.

“If that happens, that really widens the net, and you can see the program really return to what it was before and even be substantially larger," he said.

Tobias said his firm is currently working on two opportunity zone projects, and it has 17 total projects that have either been completed or are in the pipeline. The company has projects in Arizona and Colorado that Tobias said need "a pretty heavy lift" to get done because they are in distressed communities with not much other investment.

"Quite candidly, we are at least somewhat reliant on an extension on the program to really fully capitalize the remaining pipeline," Tobias said.

Redbrick earlier this year delivered the first three buildings of its Bridge District project in D.C. totaling 757 apartments. The company raised $225M in opportunity zone funds for that phase, Redbrick Executive Managing Director Trisha Miller said, and it has raised another $110M for a 295-unit mass timber building that is expected to begin construction soon.

The company is now raising opportunity zone money for future phases of the Bridge District, which is ultimately planned to total nearly 2,000 units. While Dubin said fundraising has been slower than in the program’s earlier years, he said investors are educating themselves on the potential extension and gearing up to deploy money.

"That's why you want to really keep close dibs on it, because it's going to accelerate, it's going to get louder and louder as we get closer to voting on a bill,” he said.

“Then all of a sudden, boom, there's opportunity zone 2.0, and here are the new highlights of what the new legislation is going to allow for. There'll be a lot of fervor, there'll be a lot of excitement.”