Furman Center Report Details Opportunity Zones in NYC

5 June 2025

The Trump administration has framed Opportunity Zones as a housing program. In fact, one of its biggest champions leads the federal housing agency.

But the national program, which allows investors to defer capital gains taxes if they park those profits in a fund that pours money into areas designated as distressed, isn’t explicitly a housing program, let alone an affordable one.

Congress’ proposal to reboot the program — part of Trump’s so-called “big, beautiful bill” — doesn’t do much to change that. In fact, the changes, based on the findings of a new report, would remove aspects of the program that likely helped drive housing construction in New York City.

A report released Thursday by New York University’s Furman Center found that housing built in New York Opportunity Zones was disproportionately market-rate and located in non-low-income districts. Such findings echo a perennial criticism of the program: That it leads to luxury housing and falls short of its goal to lift up long-neglected, investment-starved communities.

It also makes clear that any updates to the program likely won’t make up for dramatic budget shortfalls of other housing programs, which will likely have deleterious effects on future affordable housing development and upkeep.

The report also suggests that reforms on the table likely would not lead to more affordable housing construction in New York and may even threaten the limited role Opportunity Zones have played in promoting development.

The House of Representatives has pitched slightly adjusting median income levels used to select these zones and excluding higher-income areas that were previously permitted as part of the program.

According to the report, while housing construction spiked in areas designated as Opportunity Zones in the city, most of those units, more than 57 percent of nearly 50,000 units completed between 2019 and 2024, were market-rate.

These units were also disproportionately built in higher-income areas.

Housing growth in non-low-income areas outpaced the construction seen in the low-income tracts designated as Opportunity Zones in the city, according to the report. Areas that were designated as Opportunity Zones because they were adjacent to low-income tracts saw a 16 percent increase in completed housing units, compared to the 6 percent seen in other, low-income Opportunity Zones.

The state designated 306 tracts as Opportunity Zones in New York City, 14 of which were contiguous to eligible, low-income areas. Under the old Opportunity Zone program, which was approved in 2017 and expires in 2026, states were allowed to select some non-low-income tracts, so long as the median family income did not exceed 125 percent AMI of the adjacent low-income tract. This practice, and the lack of transparency around the selection of zones in general, have drawn criticism over the years.

The report notes that the largest properties in Opportunity Zones, including a 921-unit building at 101 Lincoln Avenue in the Bronx, and two projects in Long Island City, an 811-unit project at 2021 Malt Drive and 52-03 Center Boulevard, which has 800 units, were constructed in neighborhoods that had previously been upzoned to pave the way for large multifamily projects.

The zoning changes, as well as a rush to meet key deadlines to qualify for an expiring property tax break, 421a, could have been the main incentives for construction in these areas.

“While OZ status may have added a layer of financial benefit (and could have helped projects ‘pencil out’), the groundwork for these projects was laid years earlier through city-led land use decisions,” the report states.

Previous reports have similarly found that Opportunity Zones investors have flocked to were areas with higher levels of preexisting investment.

Changes on the horizon

According to the U.S. Department of the Treasury, the Opportunity Zone program inspired $89 billion in private investment between 2019 and 2022. The program has enjoyed bipartisan support, though lawmakers have pitched various reforms over the last few years.

Last month, the House of Representatives passed its version of the budget reconciliation bill, dubbed the “big, beautiful bill” by the Trump administration. That measure makes a number of changes to the Qualified Opportunity Zone program.

The measure calls for the expiration of the zones, selected by state governors in the previous program, on December 31, 2026, and for new zones to be selected starting January 1, 2027. It would eliminate the ability for governors to select contiguous census tracts, and reduce the income threshold for designating a tract as distressed, from a median family income of no more than 80 percent of the area median income to 70 percent AMI.

The measure also requires that 33 percent of tracts designated are in rural areas (or that all rural areas are designated, if those amount to less than 33 percent of the eligible tracts).

In other words, fewer tracts will be designated in urban areas like New York City, noted Nicholas Anderson, partner at Nixon Peabody.

“The reality is that rural investments are more challenging,” he said. “The capital gains of the folks that take advantage of opportunity zones more likely live in urban areas.”

The report found “little evidence that OZ designation meaningfully boosted affordable housing production,” and that the program is difficult to navigate alongside some other affordable housing financing, including low-income housing credits. It suggests that the state could try to select the next zones in areas that have been upzoned and where developers are likely to use the property tax break 485x. The state could also target “underdeveloped or vacant parcels with sufficient size and proper zoning for larger multifamily properties,” when selecting new Opportunity Zones.

The report also suggests that the state could designate tracts that are likely to be attractive to investors lookging to defer capital gains: non-low-income tracts or low-income areas that are expected to see significant price appreciation, while acknowledging that this “would undermine the stated purpose of the program to encourage investment in “distressed” areas.”

Brett Theodos, a senior fellow with the Urban Institute, said the changes proposed by Congress are a “modest admission to some of the failings of the original program.” He thinks lawmakers can go much further in focusing the program on affordable development.

“Driving down the AMI helps squeeze out some of the places that truly do not need the help. What I’d like to see is some conditioning on project use,” he said. “We could narrow the program by identifying truly needy places and/or identifying worthy investment project-types.”

Filling in the gaps

The report makes a point to say that expanding the Opportunity Zone program and a separate proposal in the reconciliation bill to expand the low-income housing tax credit program, a key tool to financing affordable housing in New York, would not make up for dramatic cuts threatening various federal housing programs.

President Donald Trump proposed a budget last month that would cut the Department of Housing and Urban Development’s budget by $33 billion or 42 percent. That included slashing $26 billion in funding for rental assistance and turning the Housing Choice Voucher Program, known as Section 8, into a limited grant program.

The plan also called for capping rental assistance at two years for “able-bodied” tenants, a move that the New York City Housing Authority estimates would result in 300,000 residents in public housing losing their homes, the City reported.

Across all the programs facing cuts, the city received nearly $6 billion last year.

The plan called for the elimination of the HOME Investment Partnerships Program and the Community Development Block Grant program. In 2024, the city received $66 million for HOME, which it uses to build and preserve affordable senior housing, and $171 million for CDBGs, which the city uses to fund code enforcement and emergency repairs.

The report suggests that, absent tax increases or moving funding from other programs to make up for these shortfalls, the city’s Department of Housing Preservation and Development will be faced with tough decisions, potentially needing to prioritize certain types of repairs or enforcement. The report notes that the city could increase penalties on landlords for violations to increase revenue, reduce the amount of rental assistance per household or put time limits on rental vouchers.

Affordable housing developers waiting for city subsidies may need to scrap projects or settle for less funding and change their project plans.

These pressures could trigger a cascading effect of deteriorating property conditions, declining property values and tax revenues, or even foreclosure in the properties that have come to financially rely upon this government assistance.

“Any funding cuts and staffing reductions from Washington that impact the City agencies that support housing production and preservation undermine our strategies to house families and individuals — including our most vulnerable neighbors,” an HPD spokesperson said.

It’s unclear where these funding cuts will land, and how much the Senate will ultimately change the “big beautiful bill.” Proponents of the Opportunity Zone program, for instance, hope that changes will be made to ease the transition between the old program and the new.

Shortly after the House released its version of the bill, Erik Hayden, founder of Urban Catalyst, a San Jose-based developer and Opportunity Zone fund manager, said he was glad that Congress had taken the initial steps to renew the tax break program.

“Hopefully when the Senate releases their version, there will be some additional language that better addresses existing oz funds,” he said in an email. “When the first OZ language came out in 2017, it was nowhere near where it ended up by 2019.”