Kit eats immovables


The 2017 Tax Cuts and Jobs Act (US) established what are known as Opportunity Zones. These are low-income and high-poverty census tracts which are designed to attract investment by offering various tax advantages. I wrote about it first on the forum, here.

Now that some time has passed since the declaration of the final Opportunity Zones, Zillow Economic Research has agreed to look into the potential effect of this classification on real estate values. In other words: to what degree, if anything, will the tax benefits be capitalized into the property’s value?

Below is a chart showing the year-over-year shift in the 12-month moving average sales price for low-income census tracts that were (1) eligible and selected as an Opportunity Zone; (2) qualified and unselected; and (3) not qualified.

Kit eats immovables

My understanding is that census tracts with similar characteristics to the other two categories are identified by the “not available” category but were not available to become an Opportunity Zone, for whatever reason. Criteria also exist.

The system is still very new, but what Zillow noticed was that, after the Act was signed, the qualifying census tracts (green and yellow lines) tended to display similar sales price rises, even before the final Opportunity Zones were released. After the final zones were revealed, the selected group (green line) sales prices began to rise and shift away from the pack.

This could be evidence that the tax advantages are beginning to capitalize, or maybe not. One concern I have is why pricing tends to be even more volatile in the identified Opportunity Zones โ€“ even before the Act was released.