Jay Parsons: OZ overview and effectiveness

Fascinating new economic research shows Opportunity Zones have created far more housing than previously known (313,000 units) and at far cheaper subsidy cost than most people realize ($26k/unit) -- making OZs perhaps the most efficient, effective housing supply creation program in existence.

I suggest we double down on what actually works, eh?

The groundbreaking research was published yesterday by the Economic Innovation Group. The authors concluded that OZ are "dominating other housing tax incentives" in terms of production and efficiency. OZs provide capital gains tax benefits to incentivize long-term investments (10+ years) in designated lower-income neighborhoods. Among their findings:

1) Prior to the legislation, the neighborhoods that became Opportunity Zones had been "left behind" -- economically challenged areas seeing no housing supply growth for a decade. Since then, we've completed 313,000 new housing units across OZs nationally, with more still under construction.

See chart below for an absolutely wild visual of this impact.

2) Opportunity Zone neighborhoods now outpace the national average in creating new housing supply. This is another crazy stat because "these are genuinely distressed communities," as one of the authors, Adam Ozimek, noted. He added that some reporting suggesting otherwise has centered around an "unrepresentative handful of outlier anecdotes."

3) OZs account for 48% of new housing in designated tracts, 16% across all low-income communities, and 4% of all new housing nationally. One of the report's authors, John Lettieri, wrote that "these are astonishingly large results" impacting not only urban areas, but also suburban and rural and in between.

4) At a subsidy cost of just $26k/unit, co-author Benjamin Glasner noted that OZs are "vastly cheaper than traditional housing subsidies" for taxpayers. "The results underscore that flexible, market-driven tax incentives can mobilize private capital, unlocking significant investment potential in distressed communities."

5) Why are Opportunity Zones so effective and efficient? Unlike other programs, OZ projects have a "by-right" qualification with no bureaucratic pre-approvals. It's a federal tax benefit that doesn't require approval from cities to tap into (other than standard permits etc. to build) or special connections to access.

It turns out simpler is better and faster.

We should incentivize the creation of things we need more of as society. We need more housing. So let's lean heavily on programs that actually work. And OZs clearly work well. Encouraging to see that HUD Secretary Scott Turner -- along with policymakers on both sides of the aisle -- want to extend and expand Opportunity Zones. Perhaps even to include for-sale homes in addition to rental apartments.

Bottom line: Opportunity Zones, in Glasner's words, "may be the most effective pro-housing supply policy in America today."

Let's double down on what actually works.