Since January, Opportunity Zone (OZ) inflows across the United States have grown almost sixfold.[1] That, along with shifting investor motivations and a widening geographic reach, should quell any speculation that the program is more talk than reality.

But where is the money going -- and what is it doing? From accessible OZ data, it seems that investors are subtly evolving their motives and projects to expand beyond pure real estate. Additionally, single-family housing is becoming important and fund sizes are evolving.


A year ago, 53% of investors cited tax incentives as the primary reason to become involved in OZ.[2] That has declined to 51% which is not a big change by any means, nor is it surprising that OZ were added to the federal tax code as part of the Tax Cuts and Jobs Act in late 2017 in the hope that tax incentives would spur investment in some of the country’s most economically distressed communities. At the time, 75% of venture capital was concentrated in just three states (California, Massachusetts and New York) according to CB Insights,[3] and per capita grantmaking in New York City was about four times that of the rest of the country.

On the upside, more investors are acting out of conscience this year than last, with 19% citing social impact as their primary motivator, up from 13% in 2018.[4] For fund managers, ignoring the growing importance of social impact among investors would be a mistake – and some funds are wisely responding by preparing the groundwork to be accountable for social impact, with the firm metrics to match, especially for older and younger investors.


Pure real estate investments have comprised about 75% of fund distribution for OZ since the start of the program. But in the last two quarters, the pure real estate portion of overall fund distributions has been closer to 60%. Alternatively, investments solely focused on operating businesses or a mix of operating businesses and real estate expanded from 25% overall to about 30%.[5]

With the passage of time, we’ll be able to determine where this trend is headed, but it’s pretty clear now that the ecosystem approach is leading to a variety of positives, including more affordable housing, a stronger social impact orientation, a growing multi-asset approach, and more attention to public-private partnerships.


Emergent trends point toward 54% of OZ going toward housing. There are also positive signs when it comes to the affordable housing category, particularly with regard to single-family units.

Affordable housing is without a doubt a key need in OZ. Affordable housing has multiple sources of financing from state and federal funding, which can be added to OZ incentives, creating a potential return on investment that’s very attractive. With the right zoning in place, a reasonable permitting process, and possibly land donation for affordable housing, the OZ program would be better positioned to do the good it’s intended to do.

Organizations like the Kresge Foundation is working to go beyond the OZ statutory requirements, including prioritizing affordable housing units and preventing displacement, as well as investing in the creation of living wage jobs.

This comes against a backdrop of two other major developments – greater involvement in 2019 of mid-sized funds and, again, a larger share of investment driven by social impact concerns. Funds with between $10 million and $50 million have become much more active in 2019. At the same time, multi-asset investing is becoming more popular, and came close to matching the single-asset category in the second quarter.

This could be a move toward diversification to reduce risk, as investors are waiting for further legislative and regulatory clarification of the program. Because this alternative asset class is new, and regulatory guidance is still a work in progress, OZ funds demand rigorous oversight from specialized third-party administration as part of industry best practices.


California seemed like a slow starter in the OZ world, but that was to be expected, given the state’s complex approval process. Other large real estate markets led the pack early, including Florida and New York.

But California emerged in 2019, ranking third in the first quarter and first in the second -- with more than 17% of all projects located in the state. Florida has held steady in second place. [6]

New York has fallen sharply of late when it comes to total projects and New Jersey ranked first in the first quarter of 2019 but dropped to fifth in the second quarter. Whatever is behind these moves in the Empire and Garden states indicates a good deal of volatility and that it will be important to see how the various markets settle.

Overall, however, funds are moving steadily from single-state focuses, to a multi-state approach to more than 37% in that category in the second quarter of 2019.[7] That’s only 4 percentage points ahead of where the first quarter of the year, and growth are expected to continue.


These early results when considered together should lead those involved with OZ – or anyone considering getting involved – to be bullish about the program’s future. Nearly two years since its rollout, the goal of the OZ program to bring investment to underinvested communities is being fulfilled.

Perhaps more important (and encouraging) is the way the program has evolved since its inception, which is pointing toward more funds heading to those OZ communities that need it most.


[1] NES Financial Opportunity Zone database.Financial Opportunity Zone database. Aggregated Inflows from January - August 2019.

[2] NES Financial Survey of over 1,300 webinar participants between September 2018-August 2019.

[3] CB Insights (

[4] NES Financial Survey of over 1,300 webinar participants between September 2018-August 2019.

[5] NESF Financial OZ Database of 165 Opportunity Zone Funds

[6] NES Financial Opportunity Zone database, all time

[7] NES Financial Opportunity Zone database, all time, Q1 and Q2