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CRE Development Potential and the Selection of Opportunity Zones

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Abstract

Place-based policies are often caught between two potentially conflicting aims: (i) directing aid to needy communities and (ii) spurring investment. We study this tradeoff in the context of the Opportunity Zones (OZ) program. Leveraging unique phase-level microdata on commercial construction projects, we show that US state governors prioritized designating tracts where construction projects were already being planned. About two-thirds of the greater construction growth in OZs can be attributed to this selection. States prioritizing tracts with greater investment opportunities observed larger construction increases in designated tracts. We calibrate a structural model to quantify the effects of the program and examine counterfactuals under alternative preferences or eligibility criteria.

Suggested Citation

  • David P. Glancy & Robert J. Kurtzman & Lara Loewenstein, 2026. "CRE Development Potential and the Selection of Opportunity Zones," Finance and Economics Discussion Series 103646, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:103646
    DOI: 10.17016/FEDS.2026.056
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    1. Margaret Frank, Mary & Hoopes, Jeffrey L. & Lester, Rebecca, 2022. "What determines where opportunity knocks? Political affiliation in the selection of Opportunity Zones," Journal of Public Economics, Elsevier, vol. 206(C).
    2. Glancy, David & Kurtzman, Robert & Loewenstein, Lara, 2026. "JUE Insight: Shovel ready projects and commercial construction activity’s long and variable lags," Journal of Urban Economics, Elsevier, vol. 151(C).
    3. James Alm & Trey Dronyk‐Trosper & Sean Larkin, 2024. "Do opportunity zones create opportunities? The impact of opportunity zones on real estate prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(1), pages 214-238, January.
    4. Kevin Corinth & Naomi Feldman, 2024. "Are Opportunity Zones an Effective Place-Based Policy?," Journal of Economic Perspectives, American Economic Association, vol. 38(3), pages 113-136, Summer.
    5. Ofer Eldar & Chelsea Garber, 2023. "Does Government Play Favorites? Evidence from Opportunity Zones," Journal of Law and Economics, University of Chicago Press, vol. 66(1), pages 111-141.
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    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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