The Impact of Opportunity Zones on Housing Supply

• In Event: Place-Based Investments and Local Policy Implementation

Abstract

The United States suffers from a large and persistent shortfall in housing supply. While housing regulations are primarily decided at the local level, the federal government has for many years attempted to boost supply and affordability through a variety of policy interventions. Opportunity Zones (OZs) are one among many such policies, but only recently has enough time passed since implementation that their impact can be observed on an important indicator of local revitalization: growth in local housing stock. We measure this effect using net residential address growth from the United States Department of Housing and Urban Development’s Aggregated United States Postal Service Administrative Data on Address Vacancies. The results offer insight into the effectiveness of a novel capital gains tax incentive to drive investment activity to areas with significantly higher economic need than the typical U.S. community. Using the Callaway and Sant'Anna doubly-robust difference-in-differences estimator, we find that OZs roughly doubled the total amount of new housing added to low-income communities from Q3 2019 to Q3 2024, at an estimated fiscal cost of about $26,000 per new residential address. Our findings show that the causal effect of OZs on housing supply is positive, substantial, and has continued to grow through the end of 2024. The results furthermore show that these effects are geographically widespread. Our analysis offers a timely contribution to the literature on housing policy as well as the potential impact of capital gains tax incentives.

Author

• Benjamin Nathaniel Glasner, Economic Innovation Group
  Presenting Author