- Empire State Development must submit its picks for the newly permanent federal Opportunity Zone program by Sept. 28, and developers are waiting to see which tracts qualify.
- Tighter income and poverty thresholds cut New York’s eligible census tracts to 426, down from 524 under the original 2017 program.
- The revamp aims to push capital toward distressed and rural areas after the first round concentrated investment in fast-growing urban neighborhoods.
New York has until Sept. 28 to recommend census tracts for the newly permanent Opportunity Zones program, according to Commercial Observer. Tighter federal eligibility rules mean fewer neighborhoods will qualify this time, and developers with projects in the pipeline are anxious about which ones survive.
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Round Two of a Tax Break
Congress created Opportunity Zones in 2017, letting investors defer capital gains taxes by rolling them into Opportunity Funds and eliminate taxes on new gains after a 10-year hold. The first round designated 8,764 census tracts, roughly 12% of the U.S., and the program held more than $108 billion in assets by the end of 2024, averaging about $20 billion in new investment per year.
Investors see the permanent extension as an endorsement. Chris Milner of Cantor Fitzgerald Asset Management told Commercial Observer the program has produced housing in supply-constrained markets nationwide, and that the new legislation validates that long-term thesis.
The results were lopsided. The National Community Reinvestment Coalition found that about 42% of investment went into just 1% of zones, and 75% funded market-rate rental housing. An Urban Institute study found 93% flowed to metro areas.
The Details
After Congress made the program permanent, Treasury tightened qualification. Tracts now need a median income at 70% of the area or statewide median, down from 80%, or a poverty rate where at least one in five residents falls below the poverty line. Investments in rural areas also earn a 30% reduction in capital gains tax.
Those changes cut eligible communities nationwide by about 20%. In New York, only 426 tracts will be designated, compared with 524 originally. Empire State Development said it is weighing community need, housing growth, geographic balance and regional input, and won’t automatically exclude existing zones that still qualify.
Where the Map Could Land
A Novogradac analysis estimates that large parts of southern and eastern Brooklyn, South Williamsburg, Flushing and Corona in Queens, Staten Island’s North Shore, East Harlem, Washington Heights and nearly all of the Bronx are eligible. Neighborhoods that gentrified quickly after the first round, such as parts of Gowanus, Astoria and Long Island City, may drop off.
Upstate, distressed rural tracts, struggling downtowns in western New York and the Capital Region, and Westchester suburbs like Yonkers, Mount Vernon and Port Chester are all in play. Other states are already moving, with Texas having nominated 605 tracts for the program’s second round.
Why It Matters
The designations land as New York leans hard into housing production. Gov. Kathy Hochul has committed $25 billion toward 100,000 affordable homes over a five-year plan that wraps up in 2027, and Mayor Zohran Mamdani has pledged 200,000 new affordable units over the next decade. Opportunity Zone capital could steer that activity into tracts that missed the state’s multifamily construction boom.
Jamie Ansorge of Cozen O’Connor said developers are most concerned about sites they control but haven’t broken ground on, and redesignation is key for investor continuity. The stakes mirror the developer scramble playing out as new maps emerge nationwide.
What’s Next
Once the state submits its list, attention will shift to whether local governments are ready to support projects. Ansorge wants tracts around Metro-North’s four planned East Bronx stations included, betting new transit will drive demand.
Silverstein Properties’ Jeffrey Deitrich cautioned that designations only work where as-of-right zoning, infrastructure and responsive building departments are in place, so the map is only half the equation.
