Data from the first quarter of 2022 indicates positive trends for property values in OZ tracts
A new report shows significant increases for home prices in Qualified Opportunity Zones, or QOZ. Median home prices in QOZs have risen similarly to those in other areas of the country, a positive sign for a program designed to incentivize investment in underserved neighborhoods.
Created as part of the Tax Cuts and Jobs Act of 2017, Opportunity Zones are low-income census tracts certified by the Treasury Department. A total of 8.762 tracts exist across all 50 states, the District of Columbia, and all five inhabited overseas territories. The initiative created tax incentives for investment in these areas in order to increase development in low-income neighborhoods.
While Opportunity Zones have attracted a great deal of investment in the first few years of the program, there is not yet enough long-term data to draw accurate conclusions on the effectiveness of the initiative in lifting communities out of poverty. However, a new report on home prices in QOZ tracts has shed some light on how Opportunity Zones are doing compared to other parts of the country.
Opportunity Zone home price increases on par with the overall market
The report comes from ATTOM, a leading curator of real estate data, and looked at 5,092 zones around the country that had sufficient data to analyze (at least five home sales in the first quarter of 2022). Home prices from Q1 2022 were compared to Q4 2021 and Q1 2021 in both QOZ and nationwide to determine how home prices in Opportunity Zones have fared in comparison with the rest of the US.
It’s been well-documented that home prices have been going up across the country, and the data from ATTOM shows prices in Opportunity Zones are keeping up with the market as a whole. According to the report, median prices of single-family houses and condominiums rose from Q4 2021 to Q1 2022 in 55% of Opportunity Zones with sufficient data, or 2,617 tracts, compared to 58% of tracts outside Opportunity Zones.
From the same period last year (Q1 2021 to Q1 2022), prices rose in 78% of Opportunity Zones (3,529 tracts) compared to 80% of tracts outside Opportunity Zones. Given that the results were limited to the number of tracts that had enough data to analyze annual trends, the numbers for QOZs were very close to the national average, and show that home prices are growing in OZs just as they are in the rest of the country. But it’s when looking at how much prices have jumped in QOZs compared to the overall market that the results are really promising.
Opportunity Zones showing greater gains than the market as a whole
The ATTOM report shows that typical single-family home values, when measured annually from Q1 2021 to Q1 2022, went up 16.6% year-over-year nationally. But in 55% of Opportunity Zones, home values increased by more than the market overall.
Measured quarterly, the results were similar: 52% of QOZ tracts “still saw larger quarterly improvements from late 2021 to early 2022 than the national uptick of 1.7%.” In other words, in the majority of OZ tracts included in the report, home prices went up by more than the overall market both quarterly and annually.
Certain tracts outpaced the market to an even greater extent. Measured year over year, median home prices rose at least 20% in 49% of Opportunity Zones with sufficient data, compared to 44% of other census tracts, and prices went up at least 25% “in a larger portion of Opportunity Zones than in other neighborhoods around the country.”
There are several possible explanations for these trends: for starters, home prices are high across the country, meaning first-time home buyers may be inclined to consider areas where prices are lowest. This includes Opportunity Zones, where median home prices are still below the national average. However, the increased demand could be due to more than just low housing inventory – it may be a sign that QOZs are beginning to fulfill their promise.
The Opportunity Zones initiative has been enormously successful in attracting investment to underserved neighborhoods. This increase in capital for real estate development and operating businesses is improving areas around the country, and may be making them more attractive to prospective home buyers.
The data bodes well for the future of Opportunity Zones. As real estate values go up, QOZ investments continue to demonstrate both positive social impact and worthwhile returns for investors. As more potential investors see these tracts as worthwhile areas for investment, we can expect interest in QOZs to continue.
JTC Americas has been a leader in Opportunity Zone fund administration since the program’s inception, pioneering best practices like social impact measurement and reporting to help investors and the public understand a project’s actual impact on the community. We can help Opportunity Zone fund managers provide investors with the data necessary to prove that their projects are viable from both a returns standpoint and an impact standpoint.
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To learn more about JTC Americas’ Opportunity Zones fund administration solution, download our OZ Fund Administration Solution sheet!