In South Chicago’s Englewood Neighborhood, what were once weed-choked vacant lots are now a cluster of tidy 2- and 3-flat buildings. Completed in 2021, Hope Manor Village added 36 deeply affordable units to an area that has shouldered population loss and disinvestment for decades. The developers, which include chapters of the Volunteers of America nonprofit with backing from National Equity Fund, bought the 16 city-owned lots for a dollar apiece. Using a mix of philanthropy and public money, they created homes for families earning 15 percent or less of area median income, with a preference for veterans. The development also created 43 local jobs during its first year and employs 10 people permanently.
Out of the ground in Downtown Atlanta rises the Centennial Yards megaproject. That developer, Los Angeles-based CIM Group, recently celebrated the grand opening of a sparkling glass-and-metal residential tower. The Mitchell’s 304 units include studios that start around $1,800 and 3-bedrooms that lease for just north of $6,000 a month. CIM Group originally committed to including 61 income-restricted units in The Mitchell, and got public money to do it, but backed out on that promise. Instead, the developer opted to pay an in-lieu fee of around $8 million, which shakes out to about $132,000 per waived unit. The city underpriced the true cost by at least $3 million, according to local reporting—money that could have gone toward creating affordable units elsewhere.
On their faces, these projects seem to live on opposite ends of the spectrum. But the developments share an important similarity: Both The Mitchell and Hope Manor Village were partially financed through the obscure yet powerful federal Opportunity Zone (OZ) program, which steers private money—nearly $100 billion so far—into economically disinvested census tracts, i.e., OZs.
First launched in 2017 in the Trump administration’s Tax Cuts and Jobs Act, the core idea behind the program is granting investors a substantial tax break if they commit a capital gain (a profit from selling assets like stocks or real estate) to projects in OZs. Dreamt up by Napster founder Sean Parker, the program was pitched as a low-cost, low-effort, market-driven experiment to spur private investment in low-income communities.
Eight years on—and recently revamped and made permanent—supporters say the program has worked as intended, fueling projects that otherwise wouldn’t have happened. Critics counter that it’s a tax handout to billionaires, subsidizing deals that would have happened anyway while requiring no affordability restrictions, tenant protections, or local hiring by the developers. By design, detractors argue, OZs favor appreciation in already-valuable markets over equitable investment in places that need it most.
While both sides can produce data to back their claims, the data is their own, since no federal reporting requirements existed until recently. Now that the OZ program is permanent, with revised standards and newly installed tracking and reporting rules, can the policy be wielded to serve community needs, or will it still be used to funnel money into projects where the upside for billionaires is guaranteed, but the outcomes for residents are optional?
Emerald Promises—The Lure of OZs
From the start, skeptics warned that a capital-gains-driven incentive without strong guardrails would turbocharge deals already in the pipeline, rather than produce new affordability or anti-displacement benefits. For example, city-level research in Chicago showed significant overlap between designated OZs and areas already facing displacement pressure—which are exactly the types of neighborhoods where tax-advantaged development can amplify land value shocks.
Even so, OZs were codified with little debate or fanfare. The program’s first iteration had a time limit and required light federal oversight, which perhaps helped it glide through the legislative process. But in mid-2025, a provision buried within the sprawling Republican-backed tax-and-spend package made OZs permanent federal policy. Under a revised framework—what some have dubbed “OZ 2.0”—the program faces new scrutiny, including compliance and reporting standards and a rolling re-designation of eligible tracts beginning in 2027.
Here’s how OZs work: Investors who realize a capital gain have 180 days to funnel that money into a Qualified Opportunity Fund (QOF), which is so surprisingly simple to set up that despite the term “fund,” it doesn’t require a financial institution be involved. Investors can do it themselves by filing a few forms with the Internal Revenue Service (IRS) and periodically self-certifying their investment qualifies. That simplicity is “one of the things that makes it great: You can create a fund on a couple forms and then just kind of move forward and create your investment,” says Bob Tucker, president of Chicago Community Loan Fund (CCLF), a community development financial institution (CDFI).
QOFs are held as cash until the manager or owner deploys money into a qualifying project, at which point least 90 percent of a QOF’s assets must be invested (and remain) in an eligible OZ project—either directly (by buying or improving real estate) or indirectly (by buying equity in an OZ business). If these qualifications are met, taxes on the original capital gain are deferred, and investors may qualify for partial capital gain tax reductions (10 to 15 percent) if the investment is held for five years or longer.
For hands-on investors shifting capital gains into a project-specific QOF, their dollars flow straight into that project’s acquisition, construction, or operations. There are also managed, pooled QOFs; in these, each investor is one among many in an OZ project portfolio.
While deferring taxes is a powerful financial lure on its own, OZ investors get an even bigger windfall if they stay in for the long haul. Under the program’s rules, keeping an investment in an OZ project for at least 10 years doesn’t just postpone the tax bill on the original capital gain—it wipes out the tax on any profit that money generates. In other words, the developers and fund managers eyeing long-term hold strategies stand not only to delay and potentially reduce taxes on the wealth they already amassed; they’ll also pocket every dollar of future appreciation tax-free.
In the simplest hypothetical math: Let’s say an investor sells an asset that produces a capital gain of $1 million—that investor would be looking at a 20 percent tax responsibility. But if the investor rolls that $1 million into a qualifying OZ project, the $200,000 won’t come due for at least 5 years, and the investor may only be on the hook for $185,000. Now say the investor’s $1 million funds an OZ project like The Mitchell that increases notably in value. If the investor holds the investment for at least 10 years, any return on that investment generated during that decade carries no tax burden.
Although OZ investments can legally go into either businesses or real estate, the vast majority of capital has flowed into residential development because real estate projects more easily meet program requirements, deliver tangible collateral, and offer clearer, faster pathways to substantial improvement and investor returns. And, given that the tax break on OZ project profits is permanent and total, as opposed to the deferral and partial reduction on the original capital gain, it stands to reason OZ developers would focus on luxury high-rises like The Mitchell over Hope Manor’s low-income flats.
Here’s another reason those investments are more appealing: OZ investments aren’t loans. They’re equity investments. Investors become part owners of the QOF—holding a share, much like buying stock in a company—rather than acting as creditors to the project. This means there’s no obligation to repay the QOF. Instead, the investor’s financial stake jumps or dips with the value of the OZ developments the fund is backing. There is no promised repayment, fixed interest, or schedule of returns; the investor is along for the ride.
Ruby Slipper Rhetoric—How OZs Favor Appreciation Over Affordability
If there’s a “tell” that OZs aren’t concerned with affordability, it’s the “substantial improvement” rule. Under OZ 1.0, all projects—urban and rural—were required to double the building’s basis (i.e., the value of the part you can swing a hammer at) within 30 months to keep the QOF’s tax-favored status. The land beneath it wasn’t considered in the equation. This requirement drew a bright, if perhaps unintended, line between where OZ investments made sense and where they didn’t by tilting the board toward high-land-value neighborhoods and appreciation plays, not toward deeper affordability.
For example, imagine two nearly identical 4-unit buildings—same size, same layout, same needed upgrades. Both will take $1 million of work to meet the “substantial improvement” rule. One building is in Brooklyn, New York, where the land it sits on is valued at $5 million. There, most of the property’s total value comes from the dirt, not the bricks. The other building is in rural West Virginia, where the land is cheaper and the structure carries a bigger share of value.
Here’s how that breaks down:
- Brooklyn: $5 million (land) + $1 million (building) = $6 million total
- West Virginia: $1 million (land) + $1 million (building) = $2 million total
Since investors had to double the building’s value—not the land’s—to meet the improvement test, that means in Brooklyn, even though the overall deal is bigger and the buy‑in price is higher, the improvement requirement barely registers. A $1 million rehab on a $6 million property reads as low‑risk, easy to syndicate, and simple to plug into a multi‑layered capital stack. Investors don’t blink at it—and lenders don’t either—because the spend is proportionally tiny. High land value effectively cushions the project.
In practice, this means OZ deals are easier to make pencil in high-cost urban areas where land dominates the valuation, while lower-cost rural or disinvested areas—the very places the policy claims to help—struggle to attract compliant investment. (OZ 2.0 is attempting to incentivize investment in rural areas by giving investors in rural OZ projects bigger tax breaks and reducing the improvement requirement to 50 percent of the building’s basis in the same 30-month period.)
And because private capital follows the path of least resistance to where appreciation is fastest and comparatively small improvements qualify big-dollar deals, “the vast preponderance of OZ investment has been urbanized,” says Brett Theodos, senior fellow and director of the Community Economic Development Hub at Urban Institute (UI), a nonprofit, nonpartisan economic and social research organization. More than 90 percent of OZ investment has gone to urban areas, despite rural areas comprising roughly 40 percent of designated tracts (and, arguably, facing greater need), according to available data.
Behind the Curtain—A “Golden Opportunity” for Whom?
There’s no question development happens in OZs. But many questions remain about who gets the benefit from that development.
A deep dive report published in June by the Private Equity Stakeholder Project (PESP), a nonprofit that researches the effects of private equity on communities, cataloged billions raised across roughly 200 firms and profiled several big-name players marketing OZ vehicles for large, path-of-growth projects.
The report, “Golden Opportunity: how private equity profits from the federal Opportunity Zone tax incentive,” also cites previous research showing that tax incentives “offer a windfall benefit for projects that would have occurred anyway.”
Outside PESP, two nonprofit think tanks—Americans for Tax Fairness and Strategic Actions for a Just Economy—independently released reports warning that OZs encourage gentrification and would likely displace low-income residents in designated tracts. Since its inception, the OZ program has drawn criticism from multiple nonprofits, analysts, and educators concerned with its scant guardrails and outsized investor benefits.
And while UI data shows OZs don’t typically change investor behavior, they do reward actions those investors would have taken anyway, especially in already-appreciating neighborhoods. “I don’t actually think OZs are a powerful enough tool to drive gentrification, but I do think they are a tool that investors know is most advantageous in rapidly appreciating communities,” Theodos says. “So, OZs aren’t driving gentrification; they’re benefiting from gentrification.”
Through the Poppy Field—Shiny Towers, Shadowy Data
Knowing whether the incentive fuels meaningful redevelopment or merely boosts investor returns depends on data that, for much of the program’s life, simply hasn’t existed. The Government Accountability Office in 2021 reported that IRS lacked the data needed to evaluate OZ outcomes, for example, and OZ 1.0’s opacity was a problem even for the program’s advocates. John Lettieri, president and CEO of the Economic Innovation Group (EIG), is one of those advocates.
EIG, which Lettieri co-founded with Napster’s Parker, was responsible for writing the original OZ legislation. Lettieri argues that OZ 1.0’s data reporting gaps obscured the program’s successes and hid its clear benefits. “We have been fighting, really since the beginning, to get a sweeping transparency and reporting regime in place,” he says.
Lettieri takes any data about OZ developments negatively affecting low-income residents with a “grain of salt,” he says, because “nobody knows . . . That data does not exist in a publicly useful way. It just doesn’t.”
EIG does believe its own data, though, which it leans on heavily to claim success through increased volume and price. The organization recently published a working paper that reports housing development roughly doubled in designated OZ tracts from 2019 to 2024, adding approximately 313,000 residential addresses. EIG’s report shows a federal fiscal per-unit cost of about $26,000 for each address (federally subsidized housing can cost upwards of $400,000 per unit to develop).
“It has absolutely motivated large-scale behavior and large-scale outcomes that could not have been predicted and would not have happened but for the policy itself,” he says. “And while housing values have gone up . . . there’s not been a spike in rents. More supply helps to hold rents down.”
While EIG is claiming success based on new roof counts, “more supply” is not automatically the same as more affordability or more equity, and there’s nothing in OZ 2.0 to directly require or even encourage either.
QOFs do face more lawmaker scrutiny following Congress’s 2025 revamp—and that will mean more data, eventually. Self-certification remains, but IRS now demands annual reporting on every asset, transaction, business partner, and job tied to fund investments. Investors who cut corners on recordkeeping now face real consequences—$10,000 per missed filing for smaller QOFs, and $50,000 for funds with more than $10 million in assets.
As these new reporting rules are implemented and enforced, the public record will start to fill out, but it will take years to tell an accurate story.
Chicago’s Curtain-Pull—A Mission-Driven OZ “Matchmaker”
Amid this uncertainty, some aren’t waiting for federal course correction. They’re building their own accountability into the investment process by funneling OZ investment to small-scale entrepreneurs and nonprofit developers. For example, Housing Solutions Lab identified groups in Birmingham, Alabama; Flagstaff, Arizona; and Charleston, South Carolina that successfully leveraged OZ money to create affordable housing.
In Chicago, a network of CDFIs offers a look at what happens when the tax breaks and development deals are steered by mission-driven actors who want to drive benefits to existing residents. Back in 2019, CCLF’s Tucker decided he wanted to “democratize” the OZ program. So, he and a network of approximately 30 area partners, including other CDFIs, organized the Chicagoland Opportunity Zones Consortium (COZC). The goal: separate OZs’ emerald shimmer from the real road to affordable homes by steering OZ investment to mission-driven developments.
“That’s kind of been our mantra from the start: Let’s not just make this a tool of the rich,” Tucker says. “Let’s make this a tool for community developers who oftentimes are lacking equity.”
It does this by educating local developers and investors, matching money with mission-aligned deals. COZC picks and chooses who it works with, declining capital-intensive, few-job developments, for example. “If someone who’s doing a data center wants to plop it here, and it’s going to employ one person, we’re not interested,” Tucker says. “That might be an available use, but that’s not the kind of project we’re going to bring to the community.” Instead, he explains, COZC plays matchmaker for deals that promise “quality jobs, quality amenities, and fresh foods.” The organization was instrumental in the Hope Village project, for example.
COZC is well-positioned to streamline and expand OZ access. As a network of CDFIs, it’s connected to both the cash-strapped developers and the cash-flush philanthropic investors. This is key since, as Theodos pointed out, OZ tax benefits aren’t typically powerful enough to make a deal pencil on their own. Instead, the OZ tax benefit is typically layered with other funding sources—often from subsidy programs whose administrative lift is far heavier than the OZ program’s. To fill that administrative gap, COZC goes beyond simply matching OZ investors with projects; instead the consortium actively helps developers identify and stack funding streams, such as Low-Income Housing Tax Credits, Property Assessed Clean Energy money, and other sources developers may not have known about or had the expertise to manage.
This hands-on guidance is crucial. By acting as an expert intermediary for nonprofits and small developers, COZC ensures groups that wouldn’t otherwise have access to sophisticated layered deals that include OZ money can participate, administratively and financially, without needing an in-house specialist. “It made no sense from the start for every CDFI and every nonprofit in Chicagoland to hire an OZ expert to work with them on this,” Tucker says.
So, COZC hired Robin Schabes. As the consortium’s executive director, Schabes oversees the day-to-day matchmaking process. She describes the process as “concierge-style” intermediation that helps prospective developers figure out if using OZ equity would fit alongside other available tax incentives, funding sources, and financing mechanisms to get their project to the finish line. If an OZ partnership makes sense, COZC links those startup entrepreneurs or developers to investors willing to accept community development–level returns. From there, it’s up to the developer and investor how they structure the QOF; COZC doesn’t administer a fund of its own.
COZC’s target user is the small or midsize community developer who might never otherwise approach a complicated deal that requires layered equity, or a neighborhood-scale business that needs patient capital, Tucker explains. Rather than serving big developers who have their own counsel and capital networks, the consortium focuses on projects that can deliver locally valued outcomes, and pairs them with philanthropic investors who want to support smaller mission-driven projects. “There’s always this rub of, we want OZ dollars invested in our communities, but we want them invested in the right community,” he says. “Finding that sweet spot, I think, is really where [we] need to dig deep.”
Both Schabes and Tucker reject the idea that only the ultrawealthy can play in the OZ pool. “You can be an OZ investor,” Schabes says. “I can be an OZ investor if I have capital gains that I want to reinvest in a project.” While that claim is technically true, it’s also decidedly context dependent. It’s not wrong that “anyone” with a capital gain can invest through OZs. The catch? Who actually has capital gains to roll into one.
In 2021, for example, people earning at least $1 million realized about 69 percent of all long-term capital gains; the top 10 percent of earners captured roughly three-quarters of gains. Yes, there’s a 0 percent capital-gains bracket for some lower-income filers—but you still need to have a gain, the operating cash to administer it, and the know-how (or access to someone who knows how) to quickly move that gain into a QOF. In practice, that means the pool of OZ dollars mostly comes from wealthier investors, not from typical residents in OZ neighborhoods.
That’s why COZC and other mission-driven networks like it are necessary. COZC has been successful (at least by its own tally), helping support 600+ housing units and more than a million square feet of new or repurposed space. Schabes says this is a conservative estimate, acknowledging that the program’s lax reporting requirements have created a barrier to gathering accurate data. “We get what we can get.”
A New Story—Better Transparency, Better Equity?
While we don’t know a lot of things about OZs, we know for sure that they move money. They deliver development. Therefore, EIG declares the OZ program a success and wants its continued expansion.
We also know for sure that OZs haven’t, on their own, created—and it’s unclear if they’ve even improved—affordability, stability, or wealth for the people who live where the nearly $100 billion in investment money has landed and development has followed.
“The tax benefit does not sit at the community level, the tenant level, the business level, or even the developer level—but at the investor level,” Theodos says, adding, “that’s not a criticism; it’s just economic reality.”
While Theodos reserves criticism, PESP levels it sharply, even with the program revamp. The nonprofit’s stance is that the economic reality Theodos describes means the program should be repealed entirely. “Billions of dollars in tax breaks are still billions of dollars in tax breaks,” says Sam Garin, PESP’s senior communications coordinator. “That’s money that could be used to support communities, and instead it is part of this regime of funneling money from the poor to the wealthy.”
“If you’re going to make millions of dollars off a project, in addition to the tax relief, you should have to give the people who you’re supposed to be helping actual jobs in the neighborhood,” adds Madeline Bankson, senior housing research and campaign coordinator at PESP. “If that scares [investors] away, that speaks to [OZs’] complete ineffectiveness and extremity to which this program is a handout for the billionaire class.”
COZC argues the OZ program’s outcomes aren’t inherently good or bad, since they depend on who’s steering the money and where it’s going. Tucker and Schabes don’t pretend OZs are a silver bullet. But they’ve also seen the incentive, when used carefully, plug hard-to-fill gaps, unlock stacked financing, and get long-stalled projects over the line in Chicago and Cook County.
The group’s strength comes from its collaborative model and deep footprint knowledge, Schabes says, and the centralized approach is key. “It’s helpful to city folks who work on economic development, to prospective investors, to real estate developers, and to community partners,” she says, adding: “I’m very excited about OZ 2.0 having transparency requirements so that all of us will be able to tell a better story.”
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3 thoughts on “Opportunity Zones: Billionaire Handout or Housing Booster?”
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This is such a timely and powerful piece. I really appreciate how you highlight both sides of the Opportunity Zones program — the real potential for deeply affordable housing and community revitalization and the risk of it turning into a windfall for investors with minimal benefit to local residents.
Your example of the project in South Chicago — transforming vacant lots into 36 units of deeply affordable homes for families earning ≤ 15% of area median income — is an encouraging model of how OZs could work when tied to real community need.
Shelterforce
At the same time, the contrast with the luxury tower in Atlanta — studios starting around $1,800 and 3‑bedrooms over $6,000/month — underlines how easily the program can drift into serving high‑end investment first, rather than low‑income residents.
I would appreciate continued coverage of this program and it’s outcomes. It would also be nice to hear more about how organizations can join together and do more of what COZC is doing. They sound amazing.
Thank you for this article. It greatly improved my understanding of OZs.