Housing and Community Development

I believe it is even more complicated than that. "Opportunity Zone" could mean a couple of different things in different contexts...

There is a relatively new program called Opportunity Zones (https://www.hud.gov/opportunity-zones) that 2025 HR 1 made permanent as OZ 2.0. This program enables investors in projects within designated census tracts to defer and/or eliminate capital gains taxes. The Qualified Opportunity Zones are nominated by the states and are low-income, high-poverty areas. The OZ program can potentially be combined with other affordable housing programs, such as LIHTC, depending on the sources and the types of investors involved. Seconding the recommendation for using Novogradic as a learning resource, see also https://www.novoco.com/resource-centers/opportunity-zones-resource-center

The LIHTC basis boost (an increase in the percentage of project costs the tax credits can fund) is, by default, given to Qualified Census Tracts (QCTs) and Difficult to Develop Areas (DDAs), which are federally-designated. However, the allocating authority (IHDA in Illinois, TDHCA here in Texas) has the discretion to give a boost to other criteria, among which areas of high "opportunity" are a common target. They can also give extra points in competitive scoring. In Texas they refer to an "Opportunity Index" based on the low poverty level of the census tract; Virginia designates "Opportunity Zones"; California has designated "Opportunity Areas". Illinois did both until 2024 for their "Opportunity Areas". Thus, a high opportunity area/zone is like "a type of Qualified Census Tract." The goal with these would be to encourage affordable housing in more affluent areas, reduce concentration, provide better access to amenities, and offset the additional expenses of developing in these neighborhoods. Prior to the 2024-2025 QAP, Illinois had Opportunity Areas that were "low poverty, high access to jobs, and low concentrations of existing affordable rental housing." Now they use a Quality of Life score (see page 46 of the 2026 QAP)

You may have noticed that the magic of euphemism and propaganda has resulted in "opportunity" meaning high poverty in some cases and low poverty in others. Just think of it as "opportunity for developers/investors" or "opportunity for low-income residents." The current federal flavor of the day prefers to focus on the former. But that does mean that a site in an "Opportunity Zone" for 2.0 would not get the basis boost and vice versa.

And there well could be other uses. "Neighborhood Opportunity Zone" does not return anything on google. If you're referring to the HUD OZ program, that is not really an affordable housing program in a couple of ways. But I think relevant in this case is that I would be very surprised if it could, by itself, make an affordable project (below 80% AMI, say) pencil; maybe for mixed-income workforce at scale for a developer who wants to do it, such as with PFCs. It can be one more tool in a capital stack if the investors are willing to take the capital gains savings in return for lower returns, or if it gets you access to investors you wouldn't otherwise have on board. It may ENCOURAGE the creation of new affordable units, but it will never GENERATE new affordable units the way LIHTC does (see this article in Texas Architect magazine for more on what I mean by that)

What type of affordability are they picturing, and are there any other funding sources or subsidies involved? If it's deep affordability with other subsidies or sources, I would start with that source and see if and how it could be added on. Whoever is handling the taxes and accounting for that should ideally be able to also structure the QOF. If they're trying to use only the QOF, I'd be wary of scammers and exploitative investors. But the same advisors would be able to help. Novogradic and Baker Tillery are the big ones. Looking for their smaller local competitors would be a good place to start. I've seen the most success by finding a development consultant (usually someone who prepares funding applications on behalf of the developer) and relying on them to recommend the other professionals as needed.

Hope that helps? Sorry for the length; attempting to be technically accurate. Feel free to shoot me an email if it would help to clarify a few more details to get you pointed in the right direction. 

Jason has provided a very thorough analysis, as usual.  But there are a couple items to add.  I also don't know if there is a straight answer to the original question. For reference, I have done 5 projects through the program on the development side, so that will be the lens I am responding in.

1. Opportunity zones by themselves are not a source of funding.  They attract capital because it's a source of reducing or eliminating capital gains from the sale of other properties. 
2. The value the former brings is that it acts like a permanent 1031 exchange.  But where a 1031 exchange -- the tax code that allows you to reinvest the sale of one property into another and defer the tax bill -- only defers the tax bill, investment in an Opportunity Zone allows you to avoid it entirely.
3. The caveat is that the money needs to remain at risk for 10 years (under OZ 1.0)
4. The creates a unique situation where multi-family investors need to hold their property much longer than the typical build, lease up and flip. 
5. But there is a lot of capital who is willing to do this. Thus having a project where you can park money, and potentially take lower returns, making it easier to fill financing gaps.  
6. They do typically need to invest into a fund, but individual investors are options too. 
7. OZ 2.0 won't be finalized for another 6 months or so, so it may make sense to wait until then to see the new rules.  

Not sure if that answered the question, but feel free to follow up on this thread.  You can also email me at jpastva@gmail.com if there's something more specific I could opine on. 

Thanks,

Jeff

I believe it is even more complicated than that. "Opportunity Zone" could mean a couple of different things in different contexts...

There is a relatively new program called Opportunity Zones (https://www.hud.gov/opportunity-zones) that 2025 HR 1 made permanent as OZ 2.0. This program enables investors in projects within designated census tracts to defer and/or eliminate capital gains taxes. The Qualified Opportunity Zones are nominated by the states and are low-income, high-poverty areas. The OZ program can potentially be combined with other affordable housing programs, such as LIHTC, depending on the sources and the types of investors involved. Seconding the recommendation for using Novogradic as a learning resource, see also https://www.novoco.com/resource-centers/opportunity-zones-resource-center

The LIHTC basis boost (an increase in the percentage of project costs the tax credits can fund) is, by default, given to Qualified Census Tracts (QCTs) and Difficult to Develop Areas (DDAs), which are federally-designated. However, the allocating authority (IHDA in Illinois, TDHCA here in Texas) has the discretion to give a boost to other criteria, among which areas of high "opportunity" are a common target. They can also give extra points in competitive scoring. In Texas they refer to an "Opportunity Index" based on the low poverty level of the census tract; Virginia designates "Opportunity Zones"; California has designated "Opportunity Areas". Illinois did both until 2024 for their "Opportunity Areas". Thus, a high opportunity area/zone is like "a type of Qualified Census Tract." The goal with these would be to encourage affordable housing in more affluent areas, reduce concentration, provide better access to amenities, and offset the additional expenses of developing in these neighborhoods. Prior to the 2024-2025 QAP, Illinois had Opportunity Areas that were "low poverty, high access to jobs, and low concentrations of existing affordable rental housing." Now they use a Quality of Life score (see page 46 of the 2026 QAP)

You may have noticed that the magic of euphemism and propaganda has resulted in "opportunity" meaning high poverty in some cases and low poverty in others. Just think of it as "opportunity for developers/investors" or "opportunity for low-income residents." The current federal flavor of the day prefers to focus on the former. But that does mean that a site in an "Opportunity Zone" for 2.0 would not get the basis boost and vice versa.

And there well could be other uses. "Neighborhood Opportunity Zone" does not return anything on google. If you're referring to the HUD OZ program, that is not really an affordable housing program in a couple of ways. But I think relevant in this case is that I would be very surprised if it could, by itself, make an affordable project (below 80% AMI, say) pencil; maybe for mixed-income workforce at scale for a developer who wants to do it, such as with PFCs. It can be one more tool in a capital stack if the investors are willing to take the capital gains savings in return for lower returns, or if it gets you access to investors you wouldn't otherwise have on board. It may ENCOURAGE the creation of new affordable units, but it will never GENERATE new affordable units the way LIHTC does (see this article in Texas Architect magazine for more on what I mean by that)

What type of affordability are they picturing, and are there any other funding sources or subsidies involved? If it's deep affordability with other subsidies or sources, I would start with that source and see if and how it could be added on. Whoever is handling the taxes and accounting for that should ideally be able to also structure the QOF. If they're trying to use only the QOF, I'd be wary of scammers and exploitative investors. But the same advisors would be able to help. Novogradic and Baker Tillery are the big ones. Looking for their smaller local competitors would be a good place to start. I've seen the most success by finding a development consultant (usually someone who prepares funding applications on behalf of the developer) and relying on them to recommend the other professionals as needed.

Hope that helps? Sorry for the length; attempting to be technically accurate. Feel free to shoot me an email if it would help to clarify a few more details to get you pointed in the right direction. 

Thank you all for your responses!  You confirmed it's complicated.  I found bits and pieces of the information noted here but there is no "Cliff's Notes" summary I can find.  A little more info, the land is designated "opportunity zone" so to my knowledge I'm past all that research.  But what I understand is that to get funding I'd have to partner with an established opportunity zone funding source to roll the capital gains tax etc.  I don't think I can do it as an individual or LLC for the project.  Apparently there are investment funds solely for opp zones where people can reinvest the capital gains tax into the fund.  I've talked to a few banks and can't really get a straight answer beyond them offering standard financing.  I have not tried approaching it from a tax professional angle though.  There is a secondary opp zone tax credit where the building materials can be purchased tax free.  So while not as substantial as the capital gains deferment, it's helpful.  I'm not ready to settle for that yet though.  

FYI where the land is the threshold for low income (80% AMI I believe) is very close to market rate since the neighborhood has improved rapidly since the opp zone designation.  

Jason has provided a very thorough analysis, as usual.  But there are a couple items to add.  I also don't know if there is a straight answer to the original question. For reference, I have done 5 projects through the program on the development side, so that will be the lens I am responding in.

1. Opportunity zones by themselves are not a source of funding.  They attract capital because it's a source of reducing or eliminating capital gains from the sale of other properties. 
2. The value the former brings is that it acts like a permanent 1031 exchange.  But where a 1031 exchange -- the tax code that allows you to reinvest the sale of one property into another and defer the tax bill -- only defers the tax bill, investment in an Opportunity Zone allows you to avoid it entirely.
3. The caveat is that the money needs to remain at risk for 10 years (under OZ 1.0)
4. The creates a unique situation where multi-family investors need to hold their property much longer than the typical build, lease up and flip. 
5. But there is a lot of capital who is willing to do this. Thus having a project where you can park money, and potentially take lower returns, making it easier to fill financing gaps.  
6. They do typically need to invest into a fund, but individual investors are options too. 
7. OZ 2.0 won't be finalized for another 6 months or so, so it may make sense to wait until then to see the new rules.  

Not sure if that answered the question, but feel free to follow up on this thread.  You can also email me at jpastva@gmail.com if there's something more specific I could opine on. 

Thanks,

Jeff

I believe it is even more complicated than that. "Opportunity Zone" could mean a couple of different things in different contexts...

There is a relatively new program called Opportunity Zones (https://www.hud.gov/opportunity-zones) that 2025 HR 1 made permanent as OZ 2.0. This program enables investors in projects within designated census tracts to defer and/or eliminate capital gains taxes. The Qualified Opportunity Zones are nominated by the states and are low-income, high-poverty areas. The OZ program can potentially be combined with other affordable housing programs, such as LIHTC, depending on the sources and the types of investors involved. Seconding the recommendation for using Novogradic as a learning resource, see also https://www.novoco.com/resource-centers/opportunity-zones-resource-center

The LIHTC basis boost (an increase in the percentage of project costs the tax credits can fund) is, by default, given to Qualified Census Tracts (QCTs) and Difficult to Develop Areas (DDAs), which are federally-designated. However, the allocating authority (IHDA in Illinois, TDHCA here in Texas) has the discretion to give a boost to other criteria, among which areas of high "opportunity" are a common target. They can also give extra points in competitive scoring. In Texas they refer to an "Opportunity Index" based on the low poverty level of the census tract; Virginia designates "Opportunity Zones"; California has designated "Opportunity Areas". Illinois did both until 2024 for their "Opportunity Areas". Thus, a high opportunity area/zone is like "a type of Qualified Census Tract." The goal with these would be to encourage affordable housing in more affluent areas, reduce concentration, provide better access to amenities, and offset the additional expenses of developing in these neighborhoods. Prior to the 2024-2025 QAP, Illinois had Opportunity Areas that were "low poverty, high access to jobs, and low concentrations of existing affordable rental housing." Now they use a Quality of Life score (see page 46 of the 2026 QAP)

You may have noticed that the magic of euphemism and propaganda has resulted in "opportunity" meaning high poverty in some cases and low poverty in others. Just think of it as "opportunity for developers/investors" or "opportunity for low-income residents." The current federal flavor of the day prefers to focus on the former. But that does mean that a site in an "Opportunity Zone" for 2.0 would not get the basis boost and vice versa.

And there well could be other uses. "Neighborhood Opportunity Zone" does not return anything on google. If you're referring to the HUD OZ program, that is not really an affordable housing program in a couple of ways. But I think relevant in this case is that I would be very surprised if it could, by itself, make an affordable project (below 80% AMI, say) pencil; maybe for mixed-income workforce at scale for a developer who wants to do it, such as with PFCs. It can be one more tool in a capital stack if the investors are willing to take the capital gains savings in return for lower returns, or if it gets you access to investors you wouldn't otherwise have on board. It may ENCOURAGE the creation of new affordable units, but it will never GENERATE new affordable units the way LIHTC does (see this article in Texas Architect magazine for more on what I mean by that)

What type of affordability are they picturing, and are there any other funding sources or subsidies involved? If it's deep affordability with other subsidies or sources, I would start with that source and see if and how it could be added on. Whoever is handling the taxes and accounting for that should ideally be able to also structure the QOF. If they're trying to use only the QOF, I'd be wary of scammers and exploitative investors. But the same advisors would be able to help. Novogradic and Baker Tillery are the big ones. Looking for their smaller local competitors would be a good place to start. I've seen the most success by finding a development consultant (usually someone who prepares funding applications on behalf of the developer) and relying on them to recommend the other professionals as needed.

Hope that helps? Sorry for the length; attempting to be technically accurate. Feel free to shoot me an email if it would help to clarify a few more details to get you pointed in the right direction.