Opportunity Zones were created in 2017 as a way to channel capital into specific, low-income areas. Investors could permanently avoid capital gains taxes by investing pre-tax capital gains into OZs and holding assets long-term. Even the gains from the OZ investment itself could be protected from tax. Originally set to sunset in 2026, the program was made permanent last year with the signing of The One Big Beautiful Bill. Since inception, more than $100 billion, and maybe as much as $150 billion, has been invested in OZs.

But do they work? That is, have OZ investments brought economic benefits to the communities and to OZ investors? According to new research, OZ designation clearly drives appreciation: Asset value growth for multifamily, office and industrial assets in OZs “is significantly higher” than the overall market. Office properties sold for 9% more post-designation, compared to 6% for assets outside of an OZ. That positive delta was higher for industrial (6%) and multifamily (8%). OZs, the paper notes, “stimulated extraordinary investment.”.¹

Critically, especially for skeptical Haystack readers, the researchers were careful to measure asset performance starting one year after OZ designation. This avoids capturing any initial spike in value tied to the announcement and instead reflects true, longer-term value appreciation in the OZ.

Among other findings, the best-performing OZ assets were those with the lowest starting values at the time of designation, including raw land. Post-designation, assets in OZs appreciated much faster vs. prior, which is no surprise. But the growth stopped at the boundary: There was no evidence of spillover, no faster appreciation of assets just outside an OZ.

This paper did not address employment specifically, but there’s little evidence that opportunity zones spur job growth. Some studies indicate modest overall job gains within the OZ itself - presumably from new businesses there - but most studies find no meaningful changes in employment outcomes for the residents living in an opportunity zone tracts.

And there are a lot of tracts. Nearly 9,000 designated opportunity zones span the US, more than half of which are in “persistent-poverty” counties, according to the Government Accountability Office. Three-quarters are in metropolitan districts, collectively home to 30 to 35 million people and millions of property parcels. In 2022, OZs accounted for 13% of sales nationally.

During 2019 and 2020, 15% of all new multifamily units in the US were built in opportunity zones. By last April, that share had grown to 23% of all new units under construction, the authors point out. This is not a surprise. As the paper puts it, “properties best suited for redevelopment (e.g., lower valued properties) will be most attractive to OZ Fund investment,” assumably because investors expecting large capital gains - those resulting from successful ground-up developments, for example - have the most to gain from tax protection.

So back to the bigger question—does it work? Yes, but narrowly. Opportunity Zones work best as a capital allocation tool, not as a broad economic development strategy. They reward owners of well-located, underutilized assets inside the line, particularly those capable of redevelopment. They have clearly accelerated investment and repriced certain asset classes, especially multifamily and industrial. That is a real effect, and not a trivial one.

What they do not appear to do is transform surrounding neighborhoods or generate meaningful spillovers beyond the border. The benefits are contained, not contagious. For investors, that distinction matters. OZs should be underwritten as a targeted tax advantage layered onto fundamentals—not as a rising tide that lifts adjacent assets or reshapes local economies. In that sense, Opportunity Zones are less about revitalization than precision. They don’t change the market. They do help assets win inside it.

Who: Buildcasa

What: A re-entitlement firm in California helping owners subdivide single lots, and creating a private-market-based path to increased housing stock.

The Sparkle: For all its disfunction, California has made it easier to subdivide urban infill parcels to create new housing, including for-sale homes, rentals and ADUs. Buildcasa combines a deep understanding of these regulations with the skill sets required to achieve the re-entitlements. They partner with property owners to go through the process and help individual investors target lots with subdivision potential. But there’s more - they and a real estate investment partner recently started raising for a fund that would target optimal sites for subdivision, acquire them and sell the subdivided lots to housing developers.

Did you know the U.S. is the largest crude oil producer in the world… by a lot? In 2023 we produced 22% of the world’s oil and Saudi Arabia was runner-up with 11%. The U.S. hit a huge milestone in 2021 when for the first time in the modern age we started exporting more oil than we imported. Our production and our exports have all increased since. Of note, Russia and Saudi Arabia each produce as much oil per year as… Texas and New Mexico combined. We were surprised.

Link: https://usafacts.org/articles/how-much-oil-is-produced-in-the-us/

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