A diverse group of experts presented a stark analysis of the rollout of federal Opportunity Zones during the recent ULI Housing Opportunity 2019 conference in Newport Beach, California. More than a year after the program was established, there is still confusion over regulations and implementation, they said.

“We’re all trying to figure out our role,” said moderator Rachel Reilly, who recently joined Economic Innovation Group, a public policy group. “This is all happening in real time,” she said. “It’s exciting. It’s messy.”

Opportunity Zones are generating meetings and headlines, but there is still uncertainty about the details, leaving investors and municipalities hesitant about how to move forward.

“It’s getting a lot of attention,” Reilly said. “What we have yet to see is how they measure up to actual execution and action.”

Established by Congress in the Tax Cuts and Jobs Act of 2017, the Opportunity Zones program allows investors to roll over capital gains to invest in businesses or real estate in low-income communities, in exchange for tax breaks. However, despite the early hype, federal agencies have been slow to issue clearly defined guidelines, panelists said.

“The regs aren’t out there,” said Molly McCabe, chief executive of HaydenTanner, the real estate advisory. “It is confusing.”

For investors, the tax implications are still unclear, said Blake Christian, tax partner in HCVT, an accounting firm. There are many misconceptions about the program, including potential deadlines for investing, and individual states have vastly different attitudes toward the program, he said.

Only about half of U.S. states have fully embraced the program, Christian said. There is interest in the program, however, even though many moves remain stalled, he said.

“Without more guidance [from the federal government], there is hundreds of millions that won’t move,” Christian said.

So far, 63 funds have been registered, with a total of $16 billion, said McCabe, working from National Council of State Housing Agencies (NCSHA) data. The funds range from $1 million to $3 billion, with an average of $250 million, and 89 percent are real estate focused, she said. NCSHA has an online fund directory that can be accessed at NCSHA.org.

While the numbers may be impressive, it is too early to gauge how the funds will operate, or if they will actually follow through on investments, she said.

“We don’t know where those moneys are going,” McCabe said. At this point, funding is not the issue, she said. “The volume of capital is not constrained. What is constrained is finding projects that can be executed,” she said. Qualified “shovel-ready” assets with elements attractive to investors will be in demand, due to the timelines included in the property.

If nothing else, the discussion of opportunity zones has brought attention to programs and opportunities in low-income communities, said Larry Kosmont, chairman and CEO of Kosmont Companies, the California-based consultancy. “What opportunity zones have done is fill the room,” he said.

In California, the combination of NIMBYism, regulations, and the complexities of the California Environmental Quality Act “appears to make OZs [Opportunity Zones] fundamentally incompatible,” he said. But the program still represents a significant opportunity for the state, he said.

Gavin Newsom, the newly elected governor of California, has proposed pairing Enhanced Infrastructure Financing Districts (EIFDs) with Opportunity Zones, which might provide a spark to the program and remove some bureaucratic hurdles, said Kosmont, who works with both public and private groups.

At this point, both sides are wary of committing to the program, he said. “The market doesn’t know each other’s capacity at this point,” Kosmont said. “Right now, there is just a lot of nervous tension they need to get figured out.”

Different groups are starting to focus on resolving the issues around Opportunity Zones, Reilly said. “We see a real need for technical assistance around financing,” she said.

Funds are using the program to develop different strategies, she said. Her former employer, Enterprise Community Partners, has two funds, including one focused on main street revitalization in the Southeast.

“There are a lot of interesting models happening now,” she said.

All the panelists agreed that the Opportunity Zones still represent a tremendous opportunity, in the right situation. Groups are starting to ask, “What do you want to create?” McCabe said. The program will “motivate people to do what they want to do,” she said.

More investors are looking at the program as a way to build “within their own community,” she said.

But panelists also expressed frustration, as well as concerns that the delays may soften the potential impact of the program.

“We just want to get it going and we ought to get going,” Kosmont said. “For us not to capitalize on this market would be a missed opportunity.”