While many neighborhoods around the country would seem to be great candidates for Opportunity Zone investments, some stand out as better contenders than others.
New data from ATTOM Data Solutions, a curator of a property database and a property data provider of Data-as-a-Service (DaaS), and CityBldr, a Seattle-based proptech company, highlighted 11 neighborhoods that offer attractive opportunities for housing developers to take advantage of federal reinvestment tax benefits.
CityBldr identified Anacostia in Washington, DC, the South Shore area of Chicago, City Heights in San Diego, Mid-City in Los Angeles, Parramore in Orlando, the Central District in Seattle, West Colfax in Denver, Spartan Keyes in San Jose, Calif., North End/New Center in Detroit, Buckman/Kerns in Portland, Ore. and Hilltop in Tacoma, Wash.
In a news release, CityBldr and ATTOM said most of these areas were more impoverished and densely populated than the U.S. as a whole. They also have lower income and educational levels and far higher percentages of renters than homeowners.
All 11 of these areas have poverty levels higher than the national rate of 13.1%, running from 16.3% in the Mid-City section of Los Angeles to 49.4% in the City Heights area of San Diego.
While 36% of American households are renters, between 53% and 98% of households rent homes in these 11 areas. The lowest rental rate is in Detroit’s North End/New Center area, while the highest is in Orlando’s Parramore community.
But there are some positive economic indicators in these areas. Most of them have home values that exceed the national median home price.
The typical home sells for more than the national median home price in eight of the 11 areas, according to data collected by ATTOM in the first half of 2020. The lowest median home prices are in North End/New Center in Detroit ($40,501), Parramore in Orlando ($105,000) and Hilltop in Tacoma ($217,000). The highest are in the Central District in Seattle ($795,500), Mid-City in Los Angeles ($860,750) and Spartan Keys in San Jose ($885,000).
The educational level is also higher than the national average of 32.6% in three areas—Spartan Keyes in San Jose (37.5%), Central District in Seattle (48.7%) and Buckman/Kerns in Portland (56.5%). However, in the Parramore section of Orlando, only 3.6% have earned a college degree.
“This data tells us that housing developers should consider investing in these neighborhoods because they have an immense amount of potential, plus tax benefits aimed at realizing that potential,” said Bryan Copley, co-founder and CEO of CityBldr, in a news release.
While Opportunity Zone investment slowed in the Spring, things picked back up in the summer. For patient investors, the 11 areas highlighted by CityBldr and ATTOM could be strong candidates for long-term investment.
“I think people have come to realize that the long-term thesis around Opportunity Zones hasn’t changed,” says Nick Parrish, managing director for Cresset Partners. “It’s a 10-year-plus investment horizon, which gives you the ability to be very patient and think very long-term.”