Since their creation in the 2017 Tax Cuts and Jobs Act, qualified opportunity zones have gained significant attention for their potential to drive economic development and community revitalization.

One area where opportunity zones could perhaps have the most substantial impact is affordable housing and clean energy. By strategically leveraging the tax benefits of opportunity zones, investors can contribute to community development and help build a sustainable future powered by clean energy.

Understanding Opportunity Zones
Investing in opportunity zones can really make a difference in boosting economic development and revitalizing communities. It’s incredible how these designated areas within the United States are specifically created to encourage investment and growth in communities that have traditionally been underserved.

To be designated as an opportunity zone, an area must meet specific criteria set by the U.S. Department of the Treasury, including measures of poverty or low-income indicators. Tax benefits, such as capital gains tax deferral and reduction in tax liability on invested gains, are available to investors who deploy capital into Qualified Opportunity Funds (QOFs). QOFs pool investments and deploy capital into projects within opportunity zones, which can attract investments in various sectors, including real estate, infrastructure, small businesses, and renewable energy projects.

The geographic distribution of opportunity zones allows for investment opportunities in various regions with different economic and market characteristics. At the same time, policymakers are continuing to explore ways to refine the program, enhance transparency, measure its impact, and enact legislation to extend the program and its benefits.

Opportunity zones have the potential to contribute to post-pandemic recovery, inclusive growth, and sustainable development. By effectively leveraging these designated areas, stakeholders can drive economic progress, create jobs, and foster vibrant, thriving communities.

The importance of affordable housing and community development in opportunity zones
Affordable housing is crucial in community development as it helps provide accessible and safe housing options for low-income individuals and families. ECLIPSE Cottages, for example, is manufacturing tiny homes in opportunity zones and keeping them maintained with sustainable infrastructure, allowing for more affordability. Tiny homes are also a lower risk for investors when thinking about investing in opportunity zones. Meanwhile, Fortified Solar is leveraging additional solar tax credits with opportunity zones to multiply investors’ returns.

When people can find a comfortable and affordable place to call home, it not only benefits them, but also helps support the community as a whole. By investing in affordable housing projects within opportunity zones, investors can provide shelter for those in need and contribute to the overall well-being of everyone who lives there, and through the positive tax impacts of the Opportunity Zone legislation, receive a very desirable rate of return.

This type of investment can also help create jobs, stimulate local businesses, and enhance the quality of life for all residents. Notably, when coupled with clean energy investments, affordable housing in opportunity zones catalyzes sustainable development to further reduce carbon footprints and foster environmental resilience.

The future of opportunity zones: Unlocking potential and overcoming challenges
Investing in affordable housing projects within opportunity zones comes with its own challenges. Ensuring that the benefits reach the intended communities and mitigate potential risks — such as gentrification and displacement — requires thoughtful planning and community engagement. However, these challenges can be effectively addressed with proper strategies and collaboration between investors, developers, and local stakeholders.

By working with the community in opportunity zones and integrating affordable housing, there can be a transformative change. Continued evaluation, policy improvements, and innovation will be vital in maximizing the positive impact of these investments. Seizing this opportunity allows investors and developers to better contribute to the creation of sustainable communities while simultaneously reaping the benefits of tax incentives and long-term growth.

Affordable housing projects within opportunity zones present a chance to address the pressing need for accessible housing while driving economic growth and sustainable development. The combination of tax benefits from opportunity zones creates a dynamic synergy that benefits investors and communities. By harnessing this potential, we can unlock the power of opportunity zones and pave the way for a brighter future where everyone has access to affordable housing and communities thrive.

The author, Ashley Tison, is a practicing attorney and co-founder of OZPros.com.