Opportunity zones: removing uncertainty for private capital

Opportunity zones in the US were introduced to align private capital and public purpose. The concept was simple yet powerful — encourage investment in underserved communities by offering tax incentives on capital gains.

Nearly seven years later, the reality is more complex and more urgent. In today’s capital-constrained economy, opportunity zones remain one of the most effective tools for generating both competitive returns and meaningful community impact.

Established in 2017 under the Tax Cuts and Jobs Act, opportunity zones were designed to channel long-term investment into economically distressed neighbourhoods across the US. More than 8,700 zones were designated and the incentives were compelling: investors could defer and potentially eliminate taxes on capital gains by investing through qualified opportunity funds and holding those investments for at least 10 years.

Contrary to common misconceptions, the programme is still active and continues to offer significant advantages to those who invest before the deferral benefit sunsets on December 31 2026. For investors with unrealised gains, these zones present a rare opportunity to reposition capital into productive, long-term projects with meaningful tax benefits. For communities, these investments can unlock vital resources, spurring new housing, infrastructure and economic development in areas too often overlooked by traditional financing.

Put simply, opportunity zones help fuel economic growth by mobilising private capital to serve the public good, bringing investment where it is most needed.

In today’s environment, where capital is more expensive and projects are harder to underwrite, they offer a critical incentive that can help close funding gaps. This impact is especially visible in sectors like workforce housing, where demand far exceeds supply.

Only in Miami

One recent example is a long-vacant site in downtown Miami that our fund acquired and plans to reposition for workforce housing. Thanks to the opportunity zone programme, this underutilised property will be transformed into housing for the people who keep the city running —  teachers, nurses, office workers and others who need to live near where they work. It is a clear demonstration of how thoughtful investment, aligned with public policy tools like opportunity zones, can help address deep housing shortages, while bringing new energy to urban neighbourhoods. At the same time, multifamily housing is one of the most effective uses of OZ investment for investors. Rents in this asset class tend to be naturally indexed to inflation, providing a hedge in today’s volatile markets.

Despite its many advantages, the programme remains widely misunderstood and underutilised. Some investors mistakenly assume the scheme has ended, likely due to the expiration of certain early-stage benefits. In reality, the core incentives, such as tax deferral and potential for exclusion of gains after a 10-year hold, are still very much in effect.

Others shy away due to the 10-year investment horizon, viewing it as a constraint on flexibility. While it is possible to access capital before that point, doing so typically comes with tax consequences. For investors prioritising liquidity, this longer timeline can present a hurdle. Still, for those with a long-term outlook, the programme continues to offer powerful tools for generating both financial returns and meaningful impact.

Holding or folding

One current challenge is its lengthy holding requirement, which may discourage broader participation. As policymakers consider ways to strengthen initiative, pragmatic adjustments — such as reducing the holding period — could make it more accessible and appealing to a wider range of investors committed to long-term, impactful development across the country.

What the initiative needs most now is certainty. Opportunity zones should not operate under a countdown clock. The structure is fundamentally sound: it rewards patient capital, channels investment into underserved areas, and creates assets that offer both financial returns and measurable community benefits. But to reach its full potential, investors and developers must have confidence that the framework will remain in place for the long term.

That’s why making the projects permanent — and expanding eligibility to include a broader range of gains and investors — should be a priority for current and future administrations. Removing the looming sunset would allow for more strategic planning, greater participation and longer-lasting community impact.

With stability in place, the programme could support a deeper pipeline of real estate developments that align market demand with local needs. If done correctly, opportunity zones can demonstrate how smart, well-crafted policy can harness private capital to achieve mission-driven outcomes at scale.

Opportunity zones remain a uniquely positioned tool at the intersection of private investment and public benefit. At a time when the US is grappling with urgent challenges — housing shortages, job creation and the need for more equitable economic growth — this is not a moment to let uncertainty undermine a proven solution.

Now is the time for investors to take a fresh look. The value of the programme goes beyond tax deferral, offering a chance to help build stronger, more resilient communities. The potential is real and so is the need. Solidifying and strengthening the opportunity zone framework should be a priority for the long term.

Liam Krahe (left) and David Cohen are co-founders and co-managers of SF QOZ Fund I, LLC, a private real estate investment fund focused on investing in qualified opportunity zones in Miami-Dade County, Florida