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Urban Institute researcher: Opportunity Zone designation does not guarantee investment; investments concentrate in a few tracts
Summary
Urban Institute director Brett Theodos told a GoBiz OC2 webinar that Ohio data show only about one-third of Opportunity Zones received investment and the money was highly concentrated; the Institute released an interactive selection tool to help states predict where private investors are likely to put OZ equity.
Brett Theodos, director of the Center for Local Finance and Growth at the Urban Institute, told California’s Opportunity Zones informational webinar that being designated an Opportunity Zone ‘‘does not guarantee you a dime,’’ drawing on Ohio data the Institute used to model investor behavior.
Theodos said the Institute found roughly one-third of Ohio’s designated zones attracted investment during the study period and that investment was ‘‘very lumpy,’’ with a handful of tracts receiving large shares while many tracts received little or nothing. He also noted that about 29% of reported OZ investment in Ohio was allocated to nondesignated tracks in the dataset, a discrepancy the researchers flagged for further investigation.
Why it matters: The Urban Institute’s work suggests designation alone is not sufficient to draw private capital; instead, investor preferences, local market fundamentals and project economics drive where OZ equity flows. The finding has practical implications for states choosing which census tracts to nominate for OC2 designation.
The Institute’s Ohio-based analysis showed most OZ activity took the form of real estate development rather than operating-business investments. Two-thirds of projects were residential (predominantly multifamily or mixed use), roughly a fifth were commercial and about a tenth industrial. Theodos said rents on many projects were at or above local medians—often 100–120%—indicating most projects were market-rate housing rather than deeply affordable units.
Theodos described a publicly available, interactive selection tool the Institute developed to model which eligible census tracts are most likely to attract OZ equity. The tool weighs predesignation attributes—population and income trajectories, home values and rent changes, job counts, existing multifamily stock and similar market signals—to classify tracts as more likely, less likely or likely regardless (already high-investment). He emphasized the model is ‘‘imperfect and incomplete’’ but useful as a starting point for state selectors.
On policy choices, Theodos urged a ‘‘Goldilocks’’ approach: aim for tracts that balance investor interest and social purpose rather than picking places that are already rapidly appreciating or places so distressed they are unlikely to attract investment. He warned that designating rapidly appreciating areas risks exacerbating displacement. He also stressed that local knowledge matters: models miss planned transit, zoning changes or other infrastructure that can change market dynamics.
GoBiz staff who convened the webinar said the tool and tract-level data are downloadable so local leaders can test different scenarios and better target census tracts they recommend for state nomination.
The Urban Institute presentation was framed as research-based guidance for jurisdictions weighing which tracts to recommend; the tool is meant to help states and local governments anticipate where private OZ equity is most likely to flow.
