Over 8,700 Opportunity Zones were created in 2017 when Congress passed the Tax Cuts and Jobs Act. The QOZ – or Qualified Opportunity Zone – program is intended to encourage long-term capital investment in low-income areas by allowing investors to defer taxes on realized capital gains.
With so much money at stake, and with thousands of OZs to choose from, how can investors determine which Opportunity Zones offer the most potential for capital investment?
Societal objectives of the OZ program
One method is to identify the OZs that best meet the societal objectives of the Opportunity Zone program: to realize positive social, environmental, and economic returns. Last December, LOCUS, in conjunction with Smart Growth America and The Center for Real Estate and Urban Analysis at George Washington State University, did just that. The report found that only 2 percent of the designated OZs met all three of these objectives.
The Opportunity Zones Index
An alternative tool to analyze the viability of individual Opportunity Zone investment is the Opportunity Zones Index (OZI) created by Develop Advisors LLC in partnership with mapping and spatial data analytics firm Esri. The OZI seeks to identify future OZ investment opportunity by analyzing data from the U.S. Census Bureau including:
- Population growth rate 2018-2023
- Total retail sales 2018
- Median household income 2023
- Median home value 2023
- Bachelor’s degree rate 2018
- Unemployment rate 2018
OZI ranking scores range from 0 to 100, with 100 identifying the Opportunity Zones that score highest amongst all of these metrics. There are both large and small markets with an OZI score of at least 70 including: San Francisco, Portland, Madison, WI, Salisbury, MD, and Ogden, UT, Gulfport, MS, and Reno, NV.
CRE Finance Data and Technology
We at CrediFi can help investors to gain a clear understanding of individual Opportunity Zone potential by searching for properties, loans, and lenders active in and around OZ areas. When combined, these metrics can assist wealth and fund managers, real estate developers and investors, and other stakeholders in measuring the likelihood of both the return of capital and return on capital.
Download our white paper to understand how to analyze the “opportunity” in opportunity zones.