Highlights
The Private Equity Stakeholder Project (PESP) is back with another glossy indictment of private capital. This time, the organization has trained its sights on Opportunity Zones (OZs), which were established in the 2017 tax law. OZs provide tax benefits to incentivize private investment in designated low-income communities, and there is evidence that this program is driving investment to these communities and helping to alleviate one of the key challenges for low-income families: housing affordability.
Only a worldview unshakeable in its antipathy to private enterprise could find fault with the basic proposition of this policy – but PESP stands willing. Behind the alarmist language of their critique is the same pattern that has come to define PESP’s approach to housing policy: mischaracterize investor activity, distort or omit key data, and offer solutions that would ultimately deepen the very housing challenges they claim to address.
Evidence and Opportunity Zones
Despite being a bipartisan initiative, Opportunity Zones were enacted as part of the TCJA during Trump’s first term. Accordingly, criticism of OZs is at times wrapped up in criticism of the TCJA overall or of the administration more generally. The PESP report is a case in point. Despite the pretense of a serious critique of tax policy, the report veers into a tangential critique of “Trump’s austerity agenda.”
For a more sober assessment of the performance of opportunity zones, the Economic Innovation Group (EIG), conducted a recent analysis that surveys the extant literature on the performance of Opportunity Zones. Critically, their review contextualizes research findings in the lifecycle of investment. Specifically, they correctly note that some critiques of the policy in the literature were premature, given the long-term nature of the policy design. Indeed, 4 out of the 9 major studies reviewed by EIG examined the OZ program before Treasury had even finalized the rules that regulate the program.
More recent studies have found significant investment activity in Opportunity Zones. Among the more striking findings is that OZs have directly contributed to a major increase in housing supply within low-income census tracts. Between 2019 and 2024, over 313,000 new residential addresses were created in OZs, most of which are in multifamily properties. That represents a 20 percent faster rate of growth compared to similar areas that did not receive OZ designation.
This is exactly the kind of impact the program was meant to achieve: incentivizing long-term investment in underdeveloped areas to promote revitalization and expand housing options. OZs aren’t simply shifting capital, they’re accelerating development in neighborhoods that have long suffered from capital flight. Importantly, the tax benefits, while real, come at a surprisingly modest federal cost. EIG estimates that each new housing unit created in an OZ costs taxpayers roughly $26,000 in foregone revenue. This is a fraction of the roughly $1 million cost per unit associated with the Low-Income Housing Tax Credit.
The Absence of Evidence and PESP
PESP doesn’t engage with this data. It barely acknowledges the tradeoffs involved in housing policy. Instead, it characterizes OZs as a “handout to the rich,” complains that some units are too expensive for the very lowest-income tenants and argues that most projects would have been built anyway. Indeed, the commentary PESP cites to substantiate this point was from 2019 and again, was issued before the program had even been fully implemented.
This misleading critique is consistent with other PESP reports. PESP has previously attacked private investment in housing. In one report, it grouped together dissimilar assets (student housing, workforce rentals, affordable housing) to buttress sweeping conclusions about private equity’s role in the housing market.
PESP utilizes misleading analysis to advance a housing agenda that will ultimately exacerbate the housing affordability crisis. PESP and its allied groups have consistently pushed for rent control and other policies that would reduce incentives to build or maintain housing stock—particularly in markets already struggling with underbuilding. These are the same groups now calling for the repeal of a program that has demonstrably increased investment in those same markets.
The Laws of Supply and Demand
Increased housing supply is the essential ingredient to improved affordability. Austin, Texas is a case in point. While Austin saw significant population growth, like other Sunbelt cities, it also became a leader in housing construction per capita. The result was that supply not only kept pace with demand, but also tempered a hot market. Rent growth cooled faster than almost any other major city. Austin’s robust permitting environment and a surge in homebuilding helped alleviate pressure on rents, even during a nationwide inflation spike. Redfin data shows median rents in Austin declined 22 percent off its peak in 2023.
PESP’s approach, by contrast, would make housing scarcer and more expensive. Its solution to housing scarcity is not to build more, but to regulate more, while capping rents, taxing ownership, and demonizing capital. This approach will ultimately harm the vulnerable communities the most, and worsen a housing shortage that is already stretching working families to the brink.