By Eric Willett, Vice President, and Brett Dunlavey, Analyst : rclco – excerpt
Among the more controversial aspects of the Tax Cuts and Jobs Act of 2017 was the designation of certain parcels of land as “Opportunity Zones,” which would allow investors to defer or completely waive all capital gains taxes on qualified investments in these areas. While regulations for opportunity zone investments have yet to be wholly finalized, real estate investors have amassed sizable amounts of private capital to target commercial real estate within these geographies.
Given the significant attention and capital this investment strategy has already attracted, we set out to identify the census tracts that had most gentrified in recent years, and therefore would most likely become the target of Opportunity Zone investment. Our analysis quantifies changes in real estate investment, household income levels, and associated demographic characteristics to build a Gentrification Index that is then applied to every Opportunity Zone in the 25 largest metro areas. Our analysis finds that there are a number of quickly gentrifying qualified Opportunity Zones, some with tens of thousands of multifamily units to be delivered over the next several years.