How Economic Policies Drive Housing Market Recovery

The media missed the biggest housing turnaround of the decade: 313,000 new homes quietly built in America's hardest-hit communities. Opportunity Zones are working—and now we have conclusive data to prove it. The Numbers Don't Lie New groundbreaking research from the Economic Innovation Group reveals what many policy experts suspected but couldn't yet quantify: Opportunity Zones have become one of the most effective place-based economic policies in US history. The findings are remarkable: • OZs generated over 313,000 new residential addresses since implementation—DOUBLING what would have occurred without the program • They account for 48% of new housing in designated tracts and 16% across all low-income communities • The program influenced over 4% of ALL new housing nationwide • The average cost? Just $22-26K per housing unit—a fraction of traditional subsidy costs From Lagging to Leading Perhaps most striking is the complete reversal in housing development trajectories. Communities that had been falling behind for decades are now OUTPERFORMING the national average in housing growth: • OZ communities: 1.8% annual growth rate • Non-OZ communities: 1.5% annual growth rate This isn't just statistical noise—it represents real economic integration happening in communities that had long been left behind. How OZs Succeed Where Other Programs Failed The success of Opportunity Zones stems from their unique design features: 1. No bureaucratic pre-approvals 2. No cap on investment 3. "By-right" qualification 4. Market-driven capital allocation Unlike traditional programs that fight market forces, OZs align investor incentives with community needs—letting private capital flow to where it can make the most impact. Beyond Theory: Real Results The most important question for any incentive program is: Did it cause changes that wouldn't have happened otherwise? For OZs, the answer is a resounding YES. Without this program, these communities would have only seen HALF the housing development they actually received. And notably, the effect was STILL GROWING as of Q3 2024, with more housing in the pipeline. This success crosses geographic boundaries. Mid-sized urban areas saw the largest benefit (+59 units per tract), but the positive effects extended to large urban (+50), suburban (+38), rural (+19), and small-town communities. Why This Matters In an era of chronic housing shortages and widespread economic inequality, Opportunity Zones offer a proven model that works. This isn't just another policy—it's changing lives by creating housing, spurring economic activity, and reintegrating communities into the broader economy. As Treasury Secretary Bessent recently noted, OZs are "a fantastic way to address the housing crisis." The data now confirms this assessment. --- What are your thoughts on Opportunity Zones? Have you seen their impact in your community? #OpportunityZones #RealEstate

I watched last night's State of the Union with more interest than unusual. A typical SOTU speech covers a laundy list of issues but very rarely includes initiatives related to housing. Last night, in recognition growing affordability challenges, the President talked about ways the Federal government could make it easer to buy a home, including incentives to bring down mortgage rates and a proposal to eliminate title insurance in some situations. While demand-side initiaties are important, the primary constraint on the housing market, and the reason home prices are continuing to rise, is a lack of inventory. At the Federal level, there usually isn't a lot of talk about supply-side incentives but there are some tax and other incentives to increase supply in the President's Housing Supply Action Plan, including federal incentives for local communities to make land use and zoning reforms and reduce regulatory barriers to new housing construction. The decisions about whether and how much new housing gets built is usually made by local elected officials and boards and historically the Federal government has not involved itself in these local land use policies. But as the supply shortage has gotten more severe, new tools are necessary to bring more supply to the market. Other ways in which the Federal government could incentivize more supply in the for-sale market is to examine tax policies that create disincentives for current homeowners to sell their home. Raising the capital gains tax limit on a home sale could entice some sellers to enter the market. Tax incentives for owners of rental properties to sell to first-time homebuyers is another way more supply could be brought to the market. It remains to be seen how much the Federal government's incentives will move the needle on local land use and zoning reform and on increasing supply in the market, but the Biden Administration's plan is an important step in the right direction. https://lnkd.in/et9F38qt #housing #homeownership #incentives #supply

There is always a lot of talk about liquidity being driven by the #Fed especially in the #realestate market. No one talks about other ways to inject liquidity WITHOUT playing fast and loose with interest rates. The new administration has a unique opportunity to stimulate investment without adjusting interest rates or overhauling monetary policy. Instead, it can leverage existing mechanisms, like #QOZ (Qualified Opportunity Zones), to unlock much-needed capital in areas that need it most. A few ideas from the low guy on the totem pole: 1️⃣ Extend the QOZ Program By extending the legislation, we can maintain investor confidence and encourage continued investment in underserved areas, creating jobs, revitalizing communities, and driving long-term growth. The tax benefits allow for lower return thresholds providing a lower hurdle for investors to justify placing capital. 2️⃣ Expand Eligibility Beyond Capital Gains Currently, QOZs only allow reinvestment of capital gains, limiting participation to investors with untaxed gains. By “democratizing” the eligibility to all types of capital, the administration can significantly increase the pool of available dollars, bringing more liquidity to the real estate market—especially in areas most in need of revitalization. Who doesn’t like democracy?! 3️⃣ Designate New QOZ Areas The original zones were designated based on 2010 Census data, meaning some markets and communities facing new economic challenges have been left out. Updating and expanding QOZ designations would ensure investments flow to areas that are now experiencing significant blight or economic dislocation. These simple, targeted policy changes could bring a wave of fresh capital into the real estate market, from all types of investors, unlocking development potential in markets that are struggling while spurring economic activity in communities across the country. The power of these programs to work in tandem with private capital can catalyze true transformative change. If done right, the impact will ripple far beyond real estate. #btr #multifamily #buildtorent Southern Waters Capital Southern Waters Development Dean Andrew Zack Jack