Stock-Market Rally Boosts Opportunity Zone Investing

Robert Morse, Executive Chairman of Bridge Investment Group, one of the key real estate investors in the Opportunity Zone. (Bridge, Stanford)

It’s been a good year for Opportunity Zones.

More than $ 12 billion had been invested in opportunity funds by the end of August, Bloomberg News reported, citing the latest data from Novogradac.

The tax deferral program, formalized in the Tax Cuts and Employment Act of 2017, got off to a slow start, partly because the rules were unclear. Thanks to the rules set in December 2019 and the strong recovery in the stock market last year, investors took advantage of the tax deferral to reinvest their capital gains in Opportunity Zone projects.

“We actually turned capital away,” said Robert Morse, executive chairman of Bridge Investment Group, one of the major real estate investors in the Opportunity Zone. The company’s investment was nearly $ 2 billion – double what it was in 2019 – and it expects to invest an additional $ 1 billion in opportunity zones this year.

The tax deferral program is intended to give developers incentives to invest in economically disadvantaged districts. By investing their capital gains in Opportunity Zone projects, property owners and developers can postpone paying capital gains taxes until 2026. If they keep the investments for more than a decade, the tax liability will go away.

However, critics have argued that some of the designated zones didn’t need incentives to attract investors or weren’t poor areas, while others said they enrich developers with no evidence or metrics to show that their Opportunity Zone projects are benefiting the neighborhoods in which they are located.

President-elect Joe Biden has proposed reforms to the program, including incentives for developers to work with community organizations and a more robust system for reporting the impact of developer investments.

[Bloomberg News] – Akiko Matsuda

Contact Akiko Matsuda