The Opportunity Zone (OZ) program has facilitated significant housing construction, with 313,000 residential units built between Q3 2019 and Q3 2024, exceeding non-OZ areas. Critics argue these units would have been developed anyway, and even supporters note that the tax incentives aren’t enough to salvage poor projects—strong local conditions are essential. Notably, around 75% of OZ investments concentrated on the wealthiest fifth of zones, where development was already viable.
Recently, the House passed a new version of the OZ program, known as OZ 2.0, which aims to better allocate funds to disadvantaged neighborhoods. It requires states to narrow their OZ designations, including a lower income threshold and mandating that one-third of OZs be rural. However, developers and analysts doubt these changes will be effective without further adjustments.
As hurricane season approaches, the preparedness of FEMA is concerning. With more frequent billion-dollar storms, commercial real estate owners in high-risk states face soaring insurance costs—projected to double by 2030—as traditional insurers withdraw. Many are seeking alternative solutions like captives and state-run insurers, which are struggling under economic pressures. Furthermore, former President Trump’s cuts to FEMA funding have left the agency understaffed and unprepared.
Tariffs are also negatively impacting confidence in commercial real estate. The sentiment among the Commercial Real Estate Finance Council (CREFC) dropped 30.5% in Q1, the largest decline since COVID-19. Rising inflation and stagnant growth may delay anticipated Federal Reserve rate cuts. While some tariffs have been reduced, ongoing threats continue to unsettle lenders and investors. Although distressed asset deals and office-to-residential conversions provide some activity, uncertainty remains until inflation stabilizes.
Source: Bisnow.com.
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