Opportunity zones are proving to be a profitable investment to those who’ve turned to the tax break to redevelop low-income areas across the country.
Median home prices increased from the fourth quarter of 2019 to the fourth quarter of 2020 in 77% of opportunity zones with sufficient data. What’s more, median prices rose by more than 10% in nearly two-thirds of the areas—in line with growth seen in areas outside opportunity zones, according to a new report from ATTOM Data Solutions. The real estate data firm tracked 3,588 zones around the U.S. in the fourth quarter of 2020.
Congress established opportunity zones in the Tax Cuts and Jobs Act of 2017 to help revitalize low-income areas and offer investors significant tax breaks to those who do so over several years. More than 8,700 communities across the country have been designated ripe for revitalization and fall within “opportunity zones.”
“The country’s long run of home price increases continues to leave no part of the housing market untouched, boosting fortunes from the wealthiest to the poorest parts of the United States,” says Todd Teta, ATTOM Data Solutions’ chief product officer. “The latest evidence is the fourth-quarter 2020 data showing prices going up in opportunity zone neighborhoods at the same rate, and sometimes more than in more well-off communities.”
Still, prices remain substantially lower in opportunity zones, Teta adds. About 38% of these areas still have median prices of less than $150,000 as of the fourth quarter of 2020, the report notes. The Midwest continued to have the highest number of opportunity zone tracts with a median home price of less than $150,000 at 59%, followed by the South (49%), Northeast (40%), and West (6%).
While prices are low for the area, “the fact that they often rose by double-digit percentages in Q4 is significant,” Teta says. “Not only does it show the market strength, but it also suggests that many distressed communities are ripe for the redevelopment that the opportunity zone tax breaks are designed to promote.”