A pair of UC Berkeley economist researchers have recorded nearly $19 billion of Opportunity Zone (OZ) investments made in 2019 that got spread across some 1,300 census tracts in the United States.
In their April 2021 report, titled “Neighborhood-Level Investment from the U.S. Opportunity Zone Program: Early Evidence,” authors Patrick Kennedy, who is also an economic analyst at the congressional Joint Committee on Taxation, and Harrison Wheeler studied electronically filed tax records from 2019. Their data, though incomplete, is the first available evidence of OZ investment down to the tract level, and 2019 was the year investors were required to report detailed information on the location and recipients of their investments to the IRS.
Kennedy and Wheeler estimated that for 2019, there could be another $6 billion of OZ investment not accounted for in their study because it was filed via paper tax returns.
Overall, they accounted for 2,756 qualified opportunity funds (QOF) investing in 2,490 qualified Opportunity Zone businesses across 1,362 identified OZ tracts. Funds were overwhelmingly concentrated in equity investments in businesses that specialize in real estate, construction and finance.
Regarding locations of OZ investment, the paper observed that OZs within the highly populated New York and Los Angeles areas generally received the most investment, followed by places like Phoenix, Denver and San Francisco. However, OZ investment, at least on a per-capita basis, was also strong in mid-size American cities, including: Salt Lake City, Utah; Nashville, Tenn.; Tampa, Fla.; and Huntsville, Ala.
Kennedy and Wheeler wrote that the year’s real estate investment — which presumably was underutilized or in-fill development — tended to be in proximity to downtown areas.
Still, despite strong showing in the areas that did receive investment, Kennedy and Wheeler wrote, 7,402 of the 8,764 OZ tracts, or 84%, saw no investment activity. There was also about $1.2 billion of the total investment, or 11%, that was not associated with any OZ tract.
“This [fact] may reflect regulatory guidance allowing QOF funds to invest a fraction (10%) of their assets in non-OZ tracts, as well as taxpayer or administrative error,” Kennedy and Wheeler wrote.
The researchers said their paper is a working one and will be updated as new information becomes available.
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