“OPPORTUNITY KNOCKS BUT ONCE”: AN EARLY ASSESSMENT OF THE EFFECT OF OPPORTUNITY ZONES ON HOUSING AND RENTAL PRICES

Abstract

This thesis represents one of the first pieces of empirical analysis analyzing the early effects of the ‘Opportunity Zones’ defined in the Investing in Opportunity Act, a provision of the Tax Cuts and Jobs Act signed into law by President Trump in 2017. Opportunity Zones are low-income communities throughout all 50 states, chosen as the most distressed census tracts in their respective states by Governors. Investors investing in Opportunity Zones can defer capital gains taxes and, if they leave their money in the zones for long enough, eventually unlock other tax breaks associated with the program. Empirical analysis is conducted using linear and logistic regression models to measure the extent to which the percentage of housing units within a zip code that are contained within Opportunity Zones is predictive of recent percent changes in average home and rental prices for that given zip code. The analysis attempts to evaluate whether the following hypotheses are true: (1) There will be a small but measurable effect from opportunity zones on property price percent change; (2) Property prices will have responded more than rent prices to the program so far; and (3) The effects of opportunity zones will be stronger in communities that were not already gentrifying or experiencing strong house price appreciation before the program was announced. The analytical results supported all three hypotheses; these original quantitative findings were tied in with comprehensive qualitative analysis to evaluate more broadly the state of the Investing in Opportunity Act today.