A White House report released this week estimates that qualified opportunity funds have raised $75 billion in private capital through the end of 2019.
The opportunity zone legislation was part of the Tax Cuts and Jobs Act of 2017 and provides potentially significant tax breaks to investors in order to spur investment in economically distressed communities designated as opportunity zones. There are nearly 8,800 designated opportunity zones located throughout the United States.
The study noted that while some of the invested capital may have occurred without the incentive, an estimated $52 billion—or 70 percent—of the $75 billion is new investment.
The Council of Economic Advisers estimates that opportunity zone designation has resulted in a 1.1 percent increase in housing values. The study also claims that for the nearly half of opportunity zone residents who own their homes, the increase provides an estimated $11 billion in new wealth.
“Regarding effects on the federal budget, the Council of Economic Advisers finds that each $1 raised by qualified opportunity funds through 2019 has a direct forgone federal revenue effect of 15 cents,” the study states. “By comparison, each $1 in investment spurred by the new markets tax credit, an existing federal program with similar goals, results in 18 cents of forgone revenue.”
“Including indirect effects, the Council of Economic Advisers estimates that the opportunity zone incentive could be revenue neutral, with economic growth in low-income communities reducing transfer payments and offsetting forgone revenues from taxes on capital gains,” the study added.
The council projects that the capital already raised by qualified opportunity funds could lift 1 million people out of poverty and into self-sufficiency, decreasing poverty in opportunity zones by 11 percent.
The report also claims that from the second quarter of 2018 to the fourth quarter of 2019, private equity investments into opportunity zone businesses grew 29 percent relative to a comparable set of businesses not in opportunity zones.
“Opportunity zones have created half a million jobs, generated billions in economic investment, and reduced our country’s poverty rate – and it’s just the beginning,” said Ben Carson, chairman of the White House Opportunity and Revitalization Council and Secretary of the U.S. Department of Housing and Urban Development.
Additionally, President Trump issued a new executive order that instructed federal agencies to prioritize the location of facilities within distressed areas, including opportunity zones.
The Council of Economic Advisers is a United States agency established in 1946 that provides much of the empirical research for the White House and prepares the annual Economic Report of the President.