With the second iteration of federal Opportunity Zones on the horizon, Los Angeles and San Francisco look to be fertile ground for development under the program.
The new Opportunity Zone program, first introduced with President Trump’s tax cuts in 2017, was made permanent as part of the recently passed One Big Beautiful Bill Act, opening up thousands of tracts across the state for development and investment tax incentives, the Houston Business Journal reported.
California boasts the most tracts eligible for the program with 2,738 pieces of land available for breaks, according to the Business Journal. At the top of the list is Los Angeles County with 846 tracts eligible for Opportunity Zone 2.0 tax incentives, while Orange County has 138.
The Bay Area is also rife with Opportunity Zone tracts. This includes 105 in Alameda County, 88 in Santa Clara County, 84 in San Francisco County, 71 in Contra Costa County, 34 in San Mateo County, 22 in Solano County, 13 in Sonoma County, and 12 in Marin County.
The previous version of the Opportunity Zone program exceeded expectations when it came to apartment openings and units under construction in designated opportunity zones.
About 68,000 more units have opened in the Opportunity Zones than the pace that developers were completing before the tax break went into effect, according to CoStar. The estimated value of those units is estimated to be more than $18 billion.
Nationwide, apartments in Opportunity Zones make up a larger percentage of all the new units that open each year. In 2017, unit openings in Opportunity Zones accounted for 12 percent of all U.S. units, according to CoStar data. The following year — the first that the tax breaks became available — it increased to 14 percent in 2018. It climbed to 15 percent in both 2019 and 2020 and rose to 18 percent in 2021. Today, 23 percent of apartments now under construction will open in Opportunity Zones, according to CoStar.
Zones in the city of Los Angeles benefitted the most. Before the tax breaks, Opportunity Zones in L.A. had 1,245 new units, per CoStar. Last year, developers opened 3,432 apartments in these zones, while another 7,441 units are under construction.
The Opportunity Zone 2.0 program will officially open for investment on Jan. 1, 2027.
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