The results of our in-depth OZ survey are in, and the full report shows what media coverage has gotten wrong about OZ investors.
Ever since the creation of the Opportunity Zones program, there has been a lot of debate and plenty of skepticism surrounding the program, carrying with it a great deal of assumption about OZ investment only coming from the uber-wealthy as a way of skirting taxes.
While we’ve discussed how judgment of the program’s merits has been premature, this characterization of OZ as nothing more than a tax break for the wealthy has persisted because of a lack of accurate data on OZ funds and the people investing them. Who is actually investing in OZ, and why do they do it?
To solve this problem, JTC Americas and OpportunityDb conducted an in-depth survey that included OZ investors, fund managers, and other relevant stakeholders from throughout the country, as well as investors aware of OZ but who have yet to invest. The results are showing us not only who is investing in OZ and why, but what investors really think of the initiative.
The full report, “Opportunity Zones in 2022: Perception vs. Reality, is available here.
Conducted from December 2021 to February 2022, the survey included investors, developers, brokers, fund managers, bankers, advisers, and other relevant OZ stakeholders, as well as non-investors – those yet to consider investing in an OZ fund – and aspirational investors – those who’d considered investing in an OZ fund but had not yet done so.
Overall, perception of Opportunity Zones was largely positive. Most respondents had positive feelings toward the program, even those who hadn’t yet invested. 3 in 4 said OZs are equally advantageous for communities and investors.
“It brings two sectors together in a positive way,” one participant said, “to provide opportunities in communities otherwise overlooked for development investment potential.”
Who are Opportunity Zone investors?
Because of the negative press surrounding OZ, the public has been given an image of the initiative as merely a tax break for the wealthy, without a full understanding of the impact OZ projects can have on underserved areas. OZ investors have been painted as incredibly wealthy individuals who don’t actually care about helping communities. But what does the survey data tell us about those who choose to invest and why they do so?
Though we can’t be sure our survey mimics the overall demographics of OZ investors (or all those considering OZ), these numbers do show that our participants came from a wide range of age groups and wealth levels, with no one demographic dominating the data.
For those who’d invested in OZ before, 62% of investments were for $500,000 or less, far from the obscene wealth often implied by those writing about OZ.
“That’s something to think about when we hear the media talk about how this is only a program for the extremely wealthy,” said JTC’s Reid Thomas at a recent webinar discussing the survey results.
60% of investors had invested in 2 or more funds, meaning capital is getting spread around to different projects, and those investing are happy enough with the results they’re getting to become repeat investors.
As for why they chose to invest in OZ, there were many responses, with these being among the most popular:
- Return on investment: 45%
- Measurable impact on communities: 23%
- Quantification of tax benefits: 17%
With ROI leading other reasons, it’s clear current and past investors see OZ investments as sound financial products, not merely as charitable exercises.
And while tax incentives weren’t the top reason for investors’ involvement in OZ, they did have an effect: 63% of OZ investors said, “OZ incentives are enough to make me consider investments that I would not otherwise make,” and 50% said “the OZ incentive is enough that a project or fund that would not otherwise work seems attractive.” Without these incentives, it’s likely many of these projects would not have been able to raise the capital they needed.
Finding the Opportunity Zone investors of the future
The survey also included a lot of telling information on “aspirational investors,” those who have considered investing in OZ but have not yet done so. When asked why they were considering OZ, 33% said ROI, while 31% said, “Measurable impact on communities,” a greater portion than those who had already invested.
And to the prompt, “I would be willing to accept a lower financial return if I was investing in a good impact project,” 58% of those who’d considered investing but hadn’t yet done so agreed with this statement.
Part of the reason for aspirational investors being more interested in impact than those who’d already invested may be the time frame: those who jumped on OZ early saw the potential for returns with the help of tax incentives, while impact investors were waiting to see how well the program actually impacted communities.
Age may also be a factor in determining strategies for attracting OZ capital in the future: Millennials are concerned about impact and want their investment dollars to do good. As Louis Dubin of Redbrick LMD said at the webinar, “Almost to a fault, the under-30s, it’s their first question.”
Jimmy Atkinson of OpportunityDb agreed that proving impact is going to be a major differentiator for funds in the future. “Investors are actually interested in hearing about the types of impact that [a project is] making,” he said. “That’s going to become more and more important as time goes on, not less important.”
It’s clear a lot of investors who are considering OZ care deeply about impact, to the point where it overtakes returns as their primary concern. So how does a fund attract those investors? For starters, you have to prove that your projects are actually making an impact. While there are still no impact reporting requirements for OZ, smart funds are providing investors with proof of their impact success.
JTC Americas has been the leader in Opportunity Zones fund administration since the program’s inception. Our award-winning eSTAC technology platform provides real-time impact reporting along with 24/7 access to key documents, and we’ve pioneered methods for measuring and reporting on social impact to help our clients satisfy investor demand.
The survey also provided details as to why many investors are not making the connection between Opportunity Zones and impact investments, and what funds can do to change the narrative surrounding the program. In our next article, we’ll examine this data and what our webinar participants had to say about it.
Together We Grow
Read the full report from JTC Americas and OpportunityDb’s OZ survey available now!