For communities, policymakers and investors alike, the implications are profound. The next 18 months represent a generational window: Investors who move now can take advantage of a broader map, favorable asset pricing and the clarity of established rules. Meanwhile, OZ 2.0 sets the stage for deeper transparency, broader geographical reach and stronger incentives for community-aligned investing, particularly when it comes to housing.
Since their inception in 2017, opportunity zones have contributed to the creation of more than 300,000 housing units in designated communities — making OZs one of the most significant drivers of housing production over the past decade. Perhaps most importantly, OZ investments have been long-term by design, unlocking capital that stays in communities for 10 years or more. This extended timeline enables deeper, more sustained transformation, from revitalized housing to broadband infrastructure to community-centered businesses.
The new legislation retains the original DNA of the program while incorporating four major updates designed to address investor feedback and enhance community impact:
Rolling investment timelines: Under the new framework, OZ investors will have a rolling window from the point of realizing their capital gains to defer taxes for five years, receive a 10 percent step-up in basis for additional exclusion from taxation after five years, and qualify for full exclusion of capital gains held for 10 years. This eliminates the timing pressure that previously constrained many investors and introduces long-term flexibility. OZs are no longer a race against a calendar — they’re a sustainable tool investors can integrate into their long-term planning.
A more targeted zone map: Starting in 2026, governors will reselect OZ tracts using a refined map that focuses resources on the most economically distressed areas while maintaining local discretion. For investors, this shift means today’s OZ map likely offers access to certain high-demand areas — like Long Island City, N.Y., or downtown Oakland, Calif. — that may no longer qualify post-2026.
Incentives for rural investment: OZ 2.0 introduces substantial new benefits for rural investments, including a 30 percent basis step-up (versus 10 percent in urban zones). In addition, 2.0 provides for a reduced improvement requirement on existing assets (only 50 percent vs. 100 percent). While urban zones will still capture the majority of capital due to scale and deal flow, these new provisions are a direct response to rural underinvestment and provide compelling reasons for funds and investors to take a fresh look at rural America.
Stronger transparency and reporting requirements: After years of calls for better accountability, the new legislation mandates comprehensive reporting by OZ funds to the Treasury and state governments. This includes data on job creation, investment types, geographies and demographic impacts. For institutional investors, this is a welcome development that aligns OZ funds with broader environmental, social and governance (ESG) and impact investing expectations.
While many investors may be tempted to wait and see until the new rules take effect, there are several compelling reasons to invest in OZs before 2027:
• As noted above, today’s zone map still includes many high-potential urban OZs that may not qualify under the new rules. Investors who act before Jan. 1, 2027, can lock in the current locations under the existing program while still enjoying the full suite of existing benefits.
• Gains realized before 2027 can only be used under the current regime. Gains after 2027 will qualify for the new structure. This means investors with 2025–26 gains don’t face uncertainty — they simply have two distinct windows to optimize their tax strategies.
• Investment firms are already implementing creative strategies such as 1031 exchanges within OZ funds to reinvest proceeds from early exits and enhance their internal rate of return while staying compliant. This kind of tactical agility is still possible under the current rules.
Transactions underway today, like the conversion of a shuttered Baltimore hotel into affordable housing at one-fifth the typical cost, underscore why OZs remain one of the most efficient ways to align capital with community need. More deals like this can be executed between now and the program reset, when OZ 2.0 will present communities and investors with even more powerful tools to build on the successes this program has already demonstrated. Now is the time for public officials and potential investors to begin a dialog on how to make the most of this changing economic development landscape.
Steve Glickman, who served as a senior adviser in the Obama White House, is a co-founder of the Economic Innovation Group and an advisory board member of Arctaris Impact Investors.
Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
