A Study of Opportunity Zones: Using Rent Trends to Assess Policy Effectiveness

Abstract

The 2017 Tax Cuts and Jobs Act, signed by President Trump, included a provision for the creation of Opportunity Zones. Opportunity Zones are an investment tool that bipartisan economists recommended to incentivize wealthy individuals and institutions to invest in low-income, distressed communities. All 50 states, Washington, D.C., and five U.S. territories were given the option to designate a limited number of Opportunity Zones, which are defined by census tracts, to promote investment in low-income regions within their geographic areas. This independent work aims to capture the policy's effectiveness by using the change in rent as the outcome variable, rather than sale prices or other economic metrics, within Opportunity Zones. This independent work aims to evaluate the policy's effectiveness by using the change in rent as the outcome variable, focusing on rent instead of sale prices or other economic metrics within Opportunity Zones. The rent data was collected from Zillow’s Observed Rent Index, and only tracts with sufficient rent data were used in the regression. A difference-in-differences regression was run using 2018, 2019 and 2020 as the treated year and rent data as the outcome variable. In line with most of the literature, the findings show that the change in rent was statistically insignificant, and no conclusions could be drawn using rent as the outcome variable. Following these results, there is a discussion provided that may provide insight and justification into the insignificant findings.