Opportunity zones have been called one of the biggest real estate tax breaks ever, but investors have been hesitant to take advantage, a new study shows. The tax breaks—which were spawned from the 2017 federal tax overhaul--aim to spur economic growth in nearly 9,000 low-income communities designated across the country. Investors who hold onto the investments for 10 years receive the greatest tax breaks. Read more: Get Up to Speed on O-Zones
Last fall, Treasury Secretary Steven Mnuchin predicted that opportunity zones would lure more than $100 billion in private capital.
So far, however, opportunity zone funds have raised less than 15% of their goals, according to an analysis by San Francisco accounting firm Novogradac & Co. The firm reviewed 103 funds set up to invest in opportunity zones. Those funds have raised a combined $3 billion of the $22.7 billion they are seeking, The Wall Street Journal reports.
"Every manager I talk to is saying gaining traction is slower than expected," John Lettieri, chief executive of the Economic Innovation Group, a nonpartisan think tank, told The Wall Street Journal.
The length of time investors have to be committed to revitalizing the area—10 years to achieve the maximum benefit—is a concern of some investors, Chris Loeffler, chief executive of Caliber Cos. Caliber has raised about $50 million towards its $500 million goal.
Housing analysts say that opportunity zones also have been slow to be fully embraced because regulations have yet to be finalized, and the markets pegged for revitalization are new for investors. The Treasury Department released its second set of guidelines this spring.
“As investors continue to learn more about this policy, the amount of capital flowing to new and expanding businesses in those communities will only increase,” a Treasury spokesman says.
California has the most opportunity zones in the country at 374, according to a study by ATTOM Data Solutions, which analyzed 3,073 federal opportunity zone areas. Following California, Florida has the most at 317; Texas has 164; Pennsylvania has 154; North Carolina has 145; and Tennessee has 138.
Source: “Opportunity-Zone Funds Are Off to a Slow Start, Lagging Behind Heady Expectations,” The Wall Street Journal (Oct. 22, 2019) [Log-in required.]
