Tucked in the recently passed One Big Beautiful Bill Act (OBBBA) contains powerful extensions of the Opportunity Zones that were created as part of the 2017 Tax Cuts and Jobs Act. Many developers and investors will applaud the changes which make the program a permanent fixture of the tax code.
Some of the changes include a 10-year rolling selection process of Opportunity Zones by governors in every state. The way this works is that the governor of each state will select Opportunity Zones every ten years. The next selection is set to occur on July 1, 2026. In other words, some new census tracts may be designated while others may be undesignated as Opportunity Zones in 2026. The selection process will be finalized by January 1, 2027 so we expect to see new investment and activity around the selection of the zones in late 2026 into early 2027 and beyond.
There are also changes to the qualification criteria. We recommend our clients read this article by the Economic Innovation Group Opportunity Zones 2.0: Where Things Stand After the One Big Beautiful Bill Act – Economic Innovation Group to learn more about the slightly stricter criteria. This article estimates that about 20% of the current Opportunity Zones may become ineligible in the next selection cycle. Here is a map from the Economic Innovation Group that shows the eligible Opportunity Zones for 2025 based off the current census data Eligible Opportunity Zones 2025. According to the Economic Innovation Group, 313,000 new housing units were created in a 5-year period in Opportunity Zone tracts which outpace non-Opportunity Zone tracts.
There also appears to be some additional incentives for Opportunity Zones that are in rural areas so we would expect certain rural zones with improving economic conditions to see a higher level of investment and demand from developers.
As with any policy change, there are winners and losers. Amongst the winners are sponsors and developers that have previously completed Opportunity Zone projects and have the infrastructure to complete real estate developments and also maintain compliance with the tax rules and regulations. We also see rural areas receiving renewed interest from Opportunity Zone investors as well as pro-development municipalities that have embraced Opportunity Zone developments. On the other side of the ledger, we believe that certain landowners may be negatively affected by the selection process due to the tighter eligibility requirements. In essence, if you own land in a current Opportunity Zone, you may find yourself owning land in a census tract that no longer qualifies and may have some value deterioration. Some of these landowners may end up more motivated to do deals now and before their census tract disappears from the Opportunity Zone map. Other losers include municipalities that are anti-development or have undue development red tape.