Congress created Opportunity Zones in 2017 with a compelling promise: unlock private capital to revitalize America’s most distressed neighborhoods and lift up their residents. Nearly eight years and $85 billion later, it is time to acknowledge an uncomfortable truth: this well-intentioned program has primarily enriched wealthy investors while doing little to help the people it was designed to serve.
As Opportunity Zones come up for renewal in the One Big, Beautiful Bill, lawmakers should carefully examine the mounting evidence that reveals a fundamental disconnect between the program’s noble goals and its actual outcomes. The data tell a sobering story of good intentions gone awry.
Following the Money
The core problem lies in how Opportunity Zones were designed. Rather than incentivizing investments that create jobs or reduce poverty, the program rewards capital appreciation. Investors with large unrealized capital gains can defer or eliminate taxes by investing in Qualified Opportunity Funds, with the biggest tax breaks going to investments held for a decade. This structure naturally steered money toward projects promising the highest returns — luxury apartments, office buildings, and hotels — rather than the community-serving businesses that distressed neighborhoods actually need.
The numbers are stark. According to the Joint Committee on Taxation (JCT), over 62 percent of Opportunity Zone investments went to real estate, with another 8.5 percent to construction. Meanwhile, less than 1 percent went to manufacturing and a mere 0.2 percent to retail businesses. This isn’t economic development; it’s gentrification with a tax subsidy.
The Geography of Inequality
Investment patterns reveal another troubling reality: Opportunity Zones did not spread economic opportunity broadly. Instead, 63 percent of eligible census tracts received zero investment, while 78 percent of all investment flowed to just 5 percent of zones. Governors, perhaps predictably, selected zones that were already showing signs of growth or were represented by politicians from their own party. Real estate firms even created “gentrification indexes” to guide wealthy clients toward the most profitable Opportunity Zones.
This concentration was not accidental. As Treasury economists observed, the program was designed “not to make a negative-return investment profitable, but rather to make a good return greater.” In other words, Opportunity Zones subsidized investments that would likely have happened anyway, providing windfalls for wealthy investors rather than spurring new economic activity in truly distressed areas.
The Jobs That Weren’t There
Perhaps most damaging is what happened to employment. While some studies found that Opportunity Zones created new jobs, researchers discovered that virtually none of these positions went to local residents. One comprehensive study found that only about 5 percent of workers in any given census tract actually lived in that tract. The new construction and service jobs created by Opportunity Zone investments were filled by commuters from other neighborhoods, often with higher education levels than local residents possessed.
This highlights a fundamental flaw in place-based policies: they assume that creating jobs in low-income neighborhoods will automatically benefit poor residents. But employers, even when hiring for entry-level positions, often recruit through informal networks that exclude local residents. The presence of jobs does not guarantee access to those jobs, especially when there is a skills mismatch between the demands of the job and the experience of local residents.
The Persistence of Distress
The disappointing results should not entirely surprise us. Over 45 percent of Opportunity Zones have been persistently poor since 1980, despite being targets of numerous previous federal development programs. These communities have received Urban Development Action Grants, Community Development Block Grants, Empowerment Zone designations, and Economic Development Administration funding. If previous capital infusions could not transform these areas, why would another tax incentive succeed?
The federal government currently operates roughly 130 economic development programs across more than 20 agencies, with significant overlap in their target communities. Rather than adding another layer of complexity, policymakers might consider whether the fundamental approach needs rethinking.
A Windfall for the Wealthy
Meanwhile, the direct beneficiaries of Opportunity Zones tell their own story about the program’s priorities. The median Opportunity Zone investor had a household income of over $740,000, with some studies finding average incomes of nearly $5 million. These are households in the 99th percentile of income distribution, receiving tax breaks worth hundreds of thousands of dollars each.
This represents a profound misallocation of public resources. At a time when budgetary challenges are difficult and social needs are great, we are providing tax subsidies to millionaires for investments they would likely make anyway, while seeing little evidence of benefits for the disadvantaged residents these programs claim to serve.
Time for a Reset
As lawmakers consider Opportunity Zones’ future, they face a choice. They can acknowledge the program’s fundamental design flaws and allow it to sunset, redirecting resources toward proven approaches to economic mobility. Or they can attempt wholesale reform, though any effective redesign would likely make the program unrecognizable and less attractive to investors.
The evidence suggests that addressing persistent poverty requires more than capital infusion. It demands investments in education, workforce development, public safety, and infrastructure — the kinds of comprehensive, long-term commitments that tax incentives alone cannot provide.
Opportunity Zones remind us that good intentions without sound design lead to disappointing outcomes. The ultimate measure of any anti-poverty program should not be the amount of capital deployed, but the tangible improvements in residents’ economic well-being. By that standard, Opportunity Zones have been an expensive failure that deserves to be retired, not renewed.
