The opportunity zones program is approaching its two-year anniversary, but has the program fulfilled its goal of reviving 8,700 low-income neighborhoods by offering developers tax breaks when they invest their capital gains in these areas?
According to a new study by Attom Data Solutions released on Thursday, the program has failed to bolster median home prices in 80 percent of opportunity zones. Attom analyzed 3,100 opportunity zones with at least five home sales in Q2 2019 and an average of at least five sales per quarter since Q3 2018.
Of those qualifying zones, 80 percent had a median home price below the current national average of $266,000. Another 40 percent had median home prices below $150,000.
“Opportunity Zones are among the poorest areas of the country, with some of the lowest home prices,” said Attom chief product officer Todd Teta in a prepared statement. “This should come as no surprise because the zones are designed to be in or alongside economically distressed neighborhoods.”
“But the differences between these and other areas in most parts of the nation are stark,” Teta added. “The numbers provide key benchmarks for how much room there is for these areas to grow and how much new investment they need.”
Within Attom’s data set, California (347), Florida (317), Texas (164), Pennsylvania (154), North Carolina (145), and Tennessee (138) have the most opportunity zones. Out of that list, Pennsylvania seems to be faring the worst, with 53 percent of their opportunity zone tracts having a lower median home value less than half of the nearest metropolitan statistical area (MSA).
Besides Pennsylvania, opportunity zone median home value growth has remained stagnant in Alabama (55 percent), Illinois (51 percent), Ohio (47 percent), and Georgia (45 percent).
On the other hand, western states have fared much better with less than four percent of their opportunity zones failing to match the median home values of the nearest MSA. Washington has the lowest percentage (1 percent) followed by Nevada (3 percent), Oregon (4 percent), and Colorado (4 percent). Indiana (4 percent) was the only Midwestern state to make the list.
On a regional level, the West comes out on top with only 13 percent of opportunity zone tracts having a median home price of less than $150,000. Conversely, a majority of the opportunity zones in the Midwest (73 percent), South (57 percent), and Northeast (53 percent) still have median value less than $150,000.
In April, Zillow conducted a similar study that took into account all 8,700 opportunity zones. Their analysis revealed that home prices have risen by 20 percent in these zones — a plus for investors and buyers who have a larger budget. But, there’s still a lingering concern that the program could lead to gentrification that excludes current citizens from enjoying the new development.
Zillow policy advisor Alexander Casey said it will take time to conclude the true impact of the opportunity zones program, but that current trends hold the clue to which communities will benefit the most long-term.
“What’s clear in the meantime is that among the vast array of neighborhoods selected as Opportunity Zones we’ve witnessed wildly different housing market trends up to this point, which might hint at the future of these communities,” said Casey.