Are Opportunity Zones Working?
New Evidence Shows Real Estate Values Rising in Targeted Communities
Brent Smith (Virginia Commonwealth University)
When Congress created Opportunity Zones in 2017 as part of the Tax Cuts and Jobs Act, the promise was compelling: use tax incentives to redirect private capital into distressed communities that had been overlooked by investors. Seven years later, with the program recently made permanent by Congress in 2025, a crucial question remains: is it actually working?
New research analyzing over 70,000 property transactions across the United States reveals that Opportunity Zones are delivering measurable impacts on real estate markets—with important nuances about where and how the policy succeeds.
The Bottom Line: Property Values Are Rising in Opportunity Zones
The evidence suggests commercial properties in Opportunity Zones—including office buildings, industrial facilities, and multifamily properties—are appreciating faster than comparable properties outside designated areas. The results suggest the tax incentives are successfully channeling investment capital into communities that historically struggled to attract it.
This matters for several reasons. First, it indicates the policy is achieving its core objective of stimulating private investment in underserved areas. Second, rising property values can generate positive spillover effects: increased tax revenues for local governments, improved infrastructure, job creation, and enhanced economic vitality. Third, with nearly one in four new apartment units now under construction in Opportunity Zones nationwide, the program is addressing critical housing needs in communities where development had previously stalled.
Where the Policy Works Best
The impact isn't uniform across all Opportunity Zones. The research identifies specific conditions where the tax incentives generate the strongest effects:
Lower-valued properties see the greatest gains. Properties that started with lower values showed more pronounced appreciation after designation. This makes intuitive sense: these are precisely the properties where capital investment can add the most value, and where investors previously saw too much risk relative to potential returns. The tax incentives effectively tip the scales, making redevelopment projects financially viable that weren't before.
Both urban and rural communities benefit. Contrary to concerns that the program might only benefit already-gentrifying urban neighborhoods, the data shows positive effects in both urban centers and rural areas. This suggests the policy is reaching diverse communities across different geographic contexts.
The effects are contained within designated boundaries. A frequent area of interest with place-based policies is that investment might simply shift from nearby areas rather than representing new economic activity. The counterview is that the investment will stimulate economic activity beyond the borders of the policy prescription (in this case designated census tracts). The research tested for these "spillover" effects by examining properties just outside Opportunity Zone boundaries and found minimal evidence of increased economic activity. The benefits appear to be contained within the Opportunity Zone tracts where the tax benefits are available.
A Shift in the Opportunity Zone Landscape
The research also documents an interesting evolution in how investors are using Opportunity Zones. Early in the program's implementation, investors favored traditional commercial properties. But since 2022, the focus has shifted decisively toward multifamily housing—apartment buildings and residential developments.
This shift reflects broader market dynamics: softening demand for office and retail space (accelerated by pandemic-related changes in work patterns) combined with persistent housing shortages and strong rental demand. By 2025, 23% of all new multifamily units under construction in the United States are located in Opportunity Zones—a remarkable concentration given that these zones represent only about 12% of all census tracts.
This pivot toward housing development could amplify the policy's community impact, potentially addressing affordability challenges and providing residential options in neighborhoods previously underserved by the market.
As Opportunity Zones transition from a temporary program to a permanent fixture of federal economic development policy, understanding their effects becomes increasingly important. The Treasury Department is expected to direct governors to select new tracts on ten-year rotating cycles beginning in 2026-2027, potentially expanding or shifting the program's geographic reach.
Real-World Implications
For policymakers, these findings offer evidence that well-designed tax incentives can successfully direct private capital toward public policy goals. The program's recent permanent extension suggests confidence in this approach, though questions remain about how to optimize the policy—for instance, whether certain types of development should receive stronger incentives, or how to ensure that community residents benefit from the investment flowing into their neighborhoods.
For developers and investors, the research confirms what many in the industry suspected: Opportunity Zones represent genuine investment opportunities, not just tax shelters. The appreciation patterns suggest that strategic investments in these areas can deliver both financial returns and positive community impact.
For community advocates and residents, the results are mixed. Rising property values can signal neighborhood revitalization and increased economic opportunity, but they can also raise concerns about displacement and affordability. The challenge moving forward will be ensuring that existing residents can share in the benefits that new investment brings.
The Bigger Picture
Opportunity Zones represent the latest chapter in a decades-long effort to use place-based economic development policies to revitalize distressed communities. Previous programs—from empowerment zones to enterprise zones to new markets tax credits—have produced mixed results, with some scholars finding positive employment effects and others documenting minimal impact.
What distinguishes Opportunity Zones is their scale and the magnitude of the tax incentive offered. By allowing investors to defer and potentially eliminate capital gains taxes on investments held in Qualified Opportunity Funds, the program creates powerful financial motivation to deploy capital in designated areas.
The evidence now shows that capital is indeed flowing to a segment of the designated tracts, and existing property values are responding accordingly. Whether this translates into the broader community benefits promised by the program's advocates—job creation, increased opportunity for existing residents, improved infrastructure, and long-term economic vitality—remains an important question for ongoing research.
This research provides a foundation for those conversations by documenting clear evidence that the policy is influencing real estate markets in designated areas. The challenge now is to ensure that these market effects translate into meaningful improvements in the lives of people living in these communities—the ultimate measure of any place-based development policy's success.
Brent C Smith is a professor of real estate and CoStar Chair in Real Estate Data Analytics in the School of Business Kornblau Real Estate Program, at Virginia Commonwealth University.