A bit of history, and uncertainty over what's been invested
The Opportunity Zone Program was created as part of the 2017 Tax Cuts and Jobs Act to encourage private and public investment in low-income census tracts -- urban and rural -- by providing tax breaks to investors in qualified opportunity funds (QOFs).
The tax breaks include a temporary capital gains deferral and a permanent exclusion on long-term holdings of 10 years or more. Billions of dollars have poured into the funds.
The White House Opportunity and Revitalization Council this summer released a 69-page report that outlines best practices emerging so far in OZs around the country and claimed revitalization projects have already delivered economic and social benefits to OZs that are home to 35 million people.
The White House also said $75 billion in private capital had been invested in the funds so far, but that figure raised some doubt.
Brett Theodos, a senior researcher at the Urban Institute, told Bloomberg News: "It's a made-up number. It's an estimate. It's not actual data."
Bipartisan support could set the tone for what's ahead
The Opportunity Zone Program has had notable bipartisan support since its inception, and one of President-elect Joe Biden's economic advisers was a coauthor of the white paper that led to its creation. But weighing the lost tax revenue against the social benefits is at a nascent stage.
That scrutiny could be coming. A Bloomberg article published last week noted Sen. Tim Scott, the South Carolina Republican who has championed opportunity zones, has prioritized adding reporting requirements and that Biden's campaign platform included calls for the Treasury Department to both assess the social benefits and require users of the tax break to provide detailed reporting on their investments.
Also, the Government Accountability Office (GAO) already has gotten on board, issuing a report in October titled "Opportunity Zones: Improved Oversight Needed to Evaluate Tax Expenditure Performance."
The GAO noted that the Opportunity Zone Program currently has fewer limits in terms of dollars and types of investments compared to similar programs like the Low-Income Housing Tax Credit and New Markets Tax Credit, and it's not clear who's collecting data to evaluate its effectiveness.
"Additional data collection and reporting on OZs are necessary to evaluate outcomes," the government watchdogs conclude in their 28-page report.
The Millionacres bottom line: More data could yield investor direction
That helps make the new report from ATTOM Data Solutions interesting. While the White House report this summer included multiple examples of investments in action -- including residential, retail, and industrial -- this is one of the first that provides hard numbers from an independent third party.
That report -- again, based on the real estate data firm's analysis of the 1,737 zones where sales of at least five homes were recorded -- found 76% of the OZs it examined had median home prices less than the overall national median of $283,813, basically unchanged from the second quarter.
"About 36% of the zones still had median prices of less than $150,000, also about the same as in the prior quarter," the ATTOM Data Solutions report said. And in some zones, sales prices dropped in the third quarter.
But it's early in the game. The IRS didn't even release its final guidance on OZ investments until the end of 2019. And while there's uncertainty around how much money has been invested in those funds, it does appear the Opportunity Zone Program will continue and its impact will be more broadly assessed in coming months and years.
The results of that may well help solidify the program itself and help guide investors to endeavors and locations that could yield the double bottom line of growing social good and personal wealth.