Let’s be honest: Many of us in community development gave up on the Opportunity Zones program. Launched with fanfare in 2017, the program delivered highly frustrating outcomes. It offered generous tax incentives for private investors but no affordability requirements, no community benefit standards, and little transparency about where capital was going or what it was doing when it got there. In some communities, the OZ designation didn’t just attract investment; it accelerated displacement.
We said all of this—loudly—and we weren’t wrong.
But Congress responded. Last year’s reconciliation bill included many negative provisions, but changes to the OZ program offer a silver lining. The program is now permanent and, importantly, incorporates changes advocates have long sought. These changes don’t fix everything, but they matter.
One thing about OZs has always been true: they are neither inherently good nor bad; they are tools. And tools work best when people who know their community are at the table. The question has never been whether private capital will show up; it’s whether community development organizations can shape what happens when it does.
Now is the time to make sure we are at the table.
What Changed
The original OZ program was temporary, with new investments set to expire at the end of 2028. The new law (commonly referred to as OZ 2.0) is not only permanent but also pairs that permanence with a recurring redesignation cycle. Every 10 years, governors will nominate new census tracts, the Treasury will then certify them, and the map will reset. This redesignation process is a direct response to a common criticism: the original 2017 designations were frozen, based on old data, with no mechanism for correction. Now there is one. And it means a recurring window, starting right now, for community developers to shape where the next decade of OZ capital flows.
State-level processes for nominating tracts are open now through June 30, 2026, with governors submitting their final decisions to the Treasury by Sept. 29, 2026. New OZ designations take effect Jan. 1, 2027.
The new law also tightens eligibility thresholds. Newly designated zones must meet stricter low-income criteria, addressing the criticism that the original program captured too many tracts already on an upward trajectory. It also removes the much-maligned “adjacent” rule, which had previously allowed tracts contiguous to low-income-eligible tracts to be included as OZs.
Two other changes stand out. At least 33 percent of new designations must be in rural areas, defined as communities under 50,000 people that do not neighbor an urban area. Additionally, a new Qualified Rural Opportunity Fund category offers investors a 30 percent basis step-up after five years, triple the standard 10 percent. The substantial improvement requirement, which had effectively required investors to double their investment in existing property, is cut in half for rural zones. That provision took effect immediately when the legislation passed in 2025.
The new law also introduces transparency requirements. Qualified Opportunity Funds must now disclose total assets, investment amounts, and employment and housing data—with noncompliance penalties up to $250,000, loss of the right to make future investments, and loss of tax benefits. It’s not exactly the outcome-based accountability framework advocates wanted, but it will generate the data and insights needed to advocate for stronger requirements going forward.
Community Leaders’ Roles
The program’s remaining limitations are real and worth naming. There are still no affordability requirements. Eligible uses still include investments in businesses such as self-storage and cryptocurrency infrastructure that don’t advance community development goals. Advocates should keep pushing for stronger protections. However, OZ investment is going to happen. Here are three things community development organizations can do right now:
- Engage in tract selection. The state nomination window for new OZ designations is now open. All submissions must be submitted to governors by July 1. Decisions made now will lock in designated tracts for a decade. Community development organizations know where displacement pressure is building and where infrastructure and zoning support new investment. State officials need that knowledge. NALCAB has published a practical guide to identifying eligible tracts and navigating each state’s selection process, including an interactive map that layers eligibility data with neighborhood trend analysis.
- Get to know mission-driven investors. A growing cohort of OZ investors is actively seeking nonprofit and community development financial institution partners. These investors understand that community partners bring what they cannot buy: trust, local knowledge, and project pipelines built over years. Novogradac maintains a regularly updated list of Opportunity Funds, including those with mission-driven mandates, which is a useful starting point for building those relationships.
- Stay critical and stay engaged. Engaging with the OZ program does not mean endorsing it uncritically. Advocates should continue pushing for community benefit requirements, anti-displacement protections, and restrictions on uses unrelated to economic opportunity. Participating in tract selection and deal-making gives advocates standing to make those arguments.
The changes in this law reflect years of sustained advocacy by people who refused to let the program’s shortcomings go unaddressed. The redesignation cycle, tighter thresholds, rural incentives, and new reporting requirements: none of that happened by accident. They happened because community advocates showed up and made the case for these changes.
Whether these changes will be sufficient remains uncertain. Implementation details matter, and the Treasury’s forthcoming regulatory guidance on the nomination and designation process will be critical to watch.
But the nomination window is open. The map drawn this year will shape a decade of capital flows in low-income communities. Advocates owe it to their communities to be in the room when the zone selection happens.
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