Where Is the Opportunity in Opportunity Zones? Early Indicators of the Opportunity Zone Program’s Impact on Commercial Property Prices

52 Pages Posted: 1 Jun 2019 Last revised: 15 Oct 2019

See all articles by Alan Sage

Alan Sage

Massachusetts Institute of Technology (MIT)

Mike Langen

Maastricht University - Department of Finance

Alex Van de Minne

University of Connecticut - Department of Finance

Date Written: May 1, 2019

Abstract

In December 2017, the U.S. Congress passed into law the Opportunity Zone (OZ) program, offering significant tax benefits for property investments in designated low-income census tracts. As investors effectively gain from higher income, opportunity zones should affect property prices. In this study, we compare transaction prices of properties located in designated and eligible OZ census tracts, using a structural time series approach to estimate a hierarchical repeat sales price index. We find that OZ designation did not impact all properties prices, but resulted in a 13.5% price increase for ”redevelopment” properties and a 9.6% price increase for vacant development sites. We do not find an expectation effect prior to designation. Our findings suggest that the OZ program has thus far primarily passed through the statutory tax benefits to existing land owners, with limited evidence of additional value creation.

Keywords: Opportunity Zones, Real Estate, Commercial Real Estate, Tax Incentives

Suggested Citation

Sage, Alan and Langen, Mike and Van de Minne, Alex, Where Is the Opportunity in Opportunity Zones? Early Indicators of the Opportunity Zone Program’s Impact on Commercial Property Prices (May 1, 2019). Available at SSRN: https://ssrn.com/abstract=3385502 or http://dx.doi.org/10.2139/ssrn.3385502

Alan Sage

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Mike Langen

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Alex Van de Minne (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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