The Opportunity Zone (OZ) program, a national model to spur private investment of housing in underserved areas, has been extended by Congress beyond 2026, marking a significant opportunity for real estate professionals. This innovative initiative not only helps rebuild communities but is a win-win for residents, property developers, and investors. The program’s success in transforming economically distressed areas has proven its value, making it crucial for industry leaders to continue supporting it.
Opportunity Zones originated through the Tax Cuts and Jobs Act of 2017, a market-driven mechanism to channel private capital into America’s economically disadvantaged communities. The program designates particular census tracts where private investors can defer, reduce, and potentially eliminate capital gains taxes by deploying their investment capital to qualified housing projects. For investments held beyond the 10-year mark, appreciation becomes entirely tax-exempt, and depreciation is not recaptured at sale, creating a powerful incentive for “patient capital.”
This tax framework departs from traditional community development approaches and allows urban revitalization without direct government subsidies. In less than a decade, OZs have reversed the downward trajectories in many targeted communities by allowing private stakeholders to do the heavy financial lifting.
National impact on housing
The impact of Opportunity Zones on housing production across the country reveals a success story few anticipated when the program first launched in 2017. OZs accounted for 20 percent of all new multifamily units in 2023—up from just eight percent when the program began—a growth trajectory in affordable housing that directly benefits both economically distressed areas and the greater community.
Northbend, a qualified OZ development in Tempe, Arizona, exemplifies this trend. The 310-unit complex (part of a larger 600-plus-unit development completed in 2024) targeted an area where housing demand significantly outpaced supply. Milhaus invested approximately $39 million of OZ equity, alongside investors, to capitalize phase one of the project. While no OZ projects across the country have yet fully realized ROI—due to the required 10-year hold period—net returns of 10-13 percent are projected at the end of the full term. Furthermore, Northbend has sparked several other nearby developments after Milhaus, with partner Banyan Residential, built the infrastructure to attract additional investment to the high-demand location.
Northbend marks a major infusion of private capital in an area with strong growth fundamentals—proximity to Arizona State University, access to transportation corridors, a robust local job market—but was in an unincorporated county island that had been overlooked for years and suffered from massive disinvestment. Northbend now serves as a driver for future housing in the metropolitan area while supporting Tempe’s goal of growing its tax base through annexation and expansion. The production of more housing invariably creates more affordability, and the OZ program provides strong financial incentives for private investors to add to the inventory and help close the gap between supply and demand.
Cost-effectiveness of OZs
The cost-effectiveness of Opportunity Zone projects, compared to traditional subsidies, is a notable benefit that justifies the program’s extension. With a subsidy cost of approximately $26,000 per new residential address, OZs deliver housing at a fraction of the cost of many other government housing programs. This efficiency stems largely from the “by-right” qualification process, designed to eliminate bureaucratic delays and accelerate project timelines.
Milhaus now has a portfolio of 13 multifamily OZ developments, representing more than 3,500 new apartments across Indiana, Ohio, Missouri, Kansas, Arizona, Texas, and Florida. With $280 million in equity raised, these developments showcase how the OZ framework enables rapid deployment of private capital to places where it can do the most good and reap a healthy return.
The streamlined nature of OZ investments allows developers to move quickly from concept to construction, bypassing many of the hurdles that typically plague such developments. While some of these projects might not meet the strict definition of “affordable housing,” they nonetheless provide housing options in locations that have too few. This speed-to-market advantage translates to more efficient use of investment dollars, more affordable housing, and faster community impact.
Revitalizing distressed communities
Opportunity Zones create economic ripples that extend beyond housing. Projects like Marcato in Kansas City’s historic Troost corridor—the first market-rate development east of Troost Avenue in more than 50 years—and Poste in Cincinnati’s Walnut Hills neighborhood demonstrate the inherent potential of these overlooked areas. The OZ program has supercharged this existing business model, allowing it to rapidly scale across multiple markets. This acceleration aligns with the program’s intent, as evidenced by recent data showing that Opportunity Zones have added approximately 313,000 new residential addresses between 2019 and 2024, doubling the housing growth rate of previous years. Early commitment to these depressed areas positioned Milhaus to maximize its impact once tax incentives became available.
In 2012, the company’s Artistry Apartments delivered the first major Class A institutional development in downtown Indianapolis, converting a vacant block into a thriving mixed-use district. The success of Artistry followed Milhaus’ first OZ investment in 2019—Grid Apartments, also downtown—and has helped spur development of the city’s Market East District. Anchored by Cummins’ 175,000-square-foot (16,258 sq m) global distribution headquarters, the district also includes a 28-story residential complex and several sustainable businesses such as Whole Foods, Orange Theory Fitness, and Tinker Coffee.
Grid, a 175-unit development in Indianapolis’ Cole Noble neighborhood, represents Milhaus’ first Opportunity Zone investment. Located in the heart of downtown, this project revitalized an underutilized area while strengthening the urban core and incorporating public art that celebrates the city’s historic grid design.
(Photo Courtesy of Milhaus)
Policy and legislative considerations
The program’s impact on multifamily housing production reveals a success story few anticipated when it first launched. Congressional leaders from both parties recognized that effectiveness and voted to extend the OZ program past its original December 31, 2026, sunset date. Extending these tax incentives helps ensure a pipeline of new housing in neglected areas, ultimately leading to economic revitalization that benefits residents, developers, and communities alike.
Without the extension, developers would have faced substantial barriers in raising capital, restricting their ability to deliver critical housing projects that can stimulate the economy and attract new businesses to depressed areas.
Arrello, a 228-unit development by Milhaus in downtown Olathe, Kansas, demonstrates how strategic Opportunity Zone investments can catalyze revitalization in historic districts while providing modern housing options that connect residents to employment centers and local amenities.
(Photo Courtesy of Milhaus)
Market-driven investment strategies
The market-driven nature of OZs represents a fundamental shift from traditional approaches to community development. By attracting more than $100 billion in private investment by 2022, OZs have clearly demonstrated that major tax incentives can have a positive social impact.
Milhaus, for example, targets struggling neighborhoods on the fringe of progress—areas that show potential for growth and strong local support for future development. This approach maximizes both investment returns and community involvement, creating a sustainable model for continued development.
Arrello in downtown Olathe, Kansas, exemplifies this investment strategy. The 228-unit community broke ground in 2020 after Milhaus identified strong market fundamentals: proximity to employment centers, local government investment via the new Johnson County Courthouse, and commercial redevelopment momentum along Santa Fe Street. Similarly, the Ora project in North Kansas City represents strategic capital deployment in a market with a shifting economic landscape. The $20.2 million OZ investment there has transformed a predominantly industrial district into a vibrant mixed-use corridor.
The flexibility of OZ investments also allows developers to respond to local market needs rather than following a one-size-fits-all government program. This responsiveness leads to developments that better serve community needs while remaining financially viable.
Ora, a 275-unit Opportunity Zone development by Milhaus in North Kansas City, transformed a former industrial area into a vibrant residential community, driving broader redevelopment throughout the area while providing housing for young professionals in this rapidly evolving neighborhood.
(Photo Courtesy of Milhaus)
Long-term community development
The long-term investment focus of OZs also aligns with sustainable community development goals. By providing capital gains tax benefits for investments held at least 10 years, the program encourages patient capital to support genuine neighborhood transformation rather than quick-flip development.
Milhaus is committed to sustainable urban development through OZ projects that can generate substantial economic benefits. Residents of its OZ properties have added an estimated $270 million of spending power to their local areas. Plus, the projects themselves create approximately 75 full-time, on-site employment opportunities and support thousands of construction jobs.
Beyond these direct economic impacts, OZ developments often serve as anchors that attract additional investment. The presence of high-quality housing signals neighborhood stability and potential, encouraging retail businesses, service providers, and other developers to invest in previously overlooked areas.
OZs have proven to be one of the most effective tools available for transforming distressed communities through private investment. The program’s success in generating housing supply, creating jobs, and revitalizing neighborhoods demonstrates the power of market-driven approaches to community development.
The future of the OZ program remains a critical priority in alleviating the national housing shortage in places where it is most needed. By embracing the long-term tax advantages of the OZ framework and building on the program’s past successes, private capital is now well-positioned to play a significant role in creating vibrant, economically diverse communities across the country—while also seeing substantial returns on those investments.
