A Strategic Playbook for Opportunity Zones 2.0

A crucial deadline is looming, and local governments seeking to compete need to demonstrate an investible project pipeline with measurable outcomes. Not every project is a fit.

OPINION | April 16, 2026 •

Gregory Heller, Guidehouse

Aerial view of Erie, Pa., on a sunny day. — Opportunity Zones designated under the original program transformed abandoned buildings in Erie, Pa., into a vibrant urban core with apartments, shops and cafés. (Pennsylvania Department of Economic and Community Development)

Opportunity Zones (OZs) are back, and now the incentive is permanent for this program that stands to direct significant dollars into economic development projects. Starting next year, the program will have a set of new regulations that seeks to standardize tax benefits for investors, tighten census tract eligibility and add incentives for investing in rural areas. The key deadline is near: Beginning this July 1, states and U.S. territories have 90 days to select the Qualified Opportunity Zones (QOZs) where capital can flow over the next decade. Only 25 percent of eligible tracts can be selected.

Local governments don’t make designations or control private investment decisions, but they can help their states decide which tracts to designate by demonstrating an investable project pipeline. The goal is to steer capital toward projects with measurable outcomes: housing, jobs, downtown revitalization, brownfield reuse, small-business growth, infrastructure and critical facilities.

Created in 2017 and made permanent in July 2025, OZs let investors reinvest their capital gains into businesses or real estate in designated QOZ tracts through a Qualified Opportunity Fund (QOF). Some funds are formed around a single deal. If certain rules are met and the investment is held for certain periods of time, investors receive federal tax benefits. For local governments, OZs are place-based equity looking for financeable deals, and communities with ready projects are more likely to capture it.

Tract designation alone doesn’t guarantee investment, however, so pipeline quality and execution readiness matter. Aside from a list of prohibited business types, the program is broad in terms of what it can finance.

Historically, OZ equity has skewed toward market-rate real estate in large metros. To compete in smaller markets, rural areas or non-traditional projects, communities typically need to do more up front to reduce risk and fill gaps. States and local governments can pair OZ equity with public incentives, entitlements, infrastructure, gap financing, credit support and land strategy to make priority projects more investable.

The 2026 Window

Starting this July 1, states have 90 days to nominate new OZ tracts, replacing the map that emerged from the original OZ program. The Treasury recently provided guidance about tract selection, including a list of eligible tracts. Eligibility is based on income and poverty thresholds: generally, median family income (MFI) at or below 70 percent of area/state MFI, or poverty of at least 20 percent with MFI at or below 125 percent. States may designate only up to 25 percent of eligible tracts, so many qualifying areas will not be selected.

For local governments seeking to better their chances at selection, now is the time to engage and explain why a tract is positioned for investment, using a “projects-first” approach: States will favor nominations tied to credible projects, committed sponsors and a realistic financing/delivery path.

Not every project is a fit. OZ capital is private equity, so it tends to follow bankable deals with clear revenue and manageable risk. It can align with public goals through public-private partnerships (P3s) and similar structures. Examples of projects that have received OZ investment include workforce housing, downtown mixed-use, brownfield redevelopment, rural health-clinic expansion and utility-enabled site development tied to a major employer.

Because QOFs must invest, not lend, projects need a clear equity role in the capital stack. Terms may still look “debt-like” (preferred returns, priority cash flow), but investors will focus on execution risk, site readiness (zoning, public approvals) and stable revenue. Public actions that reduce uncertainty — clear approvals, committed infrastructure, reliable tenanting — can make the difference.

Local governments can help by convening sponsors and capital providers early, clarifying public commitments and encouraging a taxable private partner to form a fund aligned to priority projects. The more ready to finance a deal looks, the more it can compete for OZ equity. OZ 2.0 also offers greater tax benefits for investments in rural census tracts, alongside other rule changes intended to boost rural real estate investment.

Strategic Steps

Here’s a county/city manager’s checklist:

· Identify priority projects: Review your pipeline, especially P3s and projects with a private owner/operator. Meet with project sponsors and shortlist projects that combine high public benefit, feasible delivery and a realistic role for private equity in the capital stack.

· Make projects OZ-ready: Work to reduce risk and fill gaps relating to site control, zoning, public approvals, infrastructure commitments, credit enhancements or layered public incentives. Investors receive the same federal benefit in any QOZ in the nation; your job is to make the local deal easier to execute and more competitive.

· Create a short prospectus: For each priority project, prepare a brief that the governor’s office and fund managers can act on: project summary and team, public benefits/impacts, site/tract fit, timeline, capital structure and the specific OZ equity “ask.” Stronger prospectuses include clear data and defensible assumptions.

· Start mobilizing capital now: Investors can’t benefit from OZ 2.0 until 2027, but relationship-building starts now. Market your pipeline, connect sponsors to fund managers and show visible public-sector commitment. Early momentum can influence both tract nominations and later investment decisions.

· Think regionally: Many catalytic projects cross municipal lines. A regional approach can strengthen the pitch by showing coordination, shared priorities and a larger pipeline. Regional economic development organizations and planning entities can help align projects, standardize prospectuses and aggregate supporting data.

Opportunity Zones 2.0 is permanent, but the map for the next decade will be set in a short 2026 window. Local governments that treat nominations as a projects-and-performance exercise — backed by real deals, credible partners and clear public benefits — will be best positioned to influence state selections and attract capital.

Gregory Heller is a partner at Guidehouse, where he leads the consulting firm’s housing and community solutions practice. He previously served as executive director of the Philadelphia Redevelopment Authority.

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