Opportunity Zones Are Now Permanent. Most Developers Still Don't Know What to Do With Them.

Written by:

Steve Marcinuk

Date:

01 Sep 2026

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Over $112 billion has flowed into Opportunity Zones since the program’s creation, yet participation remains a fraction of what the program allows. Now that the One Big Beautiful Bill Act has made Opportunity Zones permanent, the gap between available capital and actual deployment raises a practical question: what is keeping developers and investors on the sidelines?

According to Frances Kern Mennone, Managing Director at Industry Consultants & Advisors within FBT Gibbons, an AmLaw 200 firm based in Cincinnati, the answer starts with the program’s disrupted early years. The program was created in 2017, zones were selected within 90 days, and Treasury didn’t release guidance on how to use it until the end of 2019.

A few months later, the pandemic sent real estate into a tailspin. The $112 billion invested so far “is still not an insignificant sum – it’s more than the New Market Tax Credit program has spent in the 26 years it’s been around,” Kern Mennone says. But given those lost early years, she argues considerably more potential remains untapped.

A New Map With a 10-Year Shelf Life

All 56 states and territories are selecting which census tracts will carry Opportunity Zone designations for the next decade. Each state can nominate only 25% of its eligible distressed tracts, a constraint that forces deliberate choices about where development incentives land.

The process works from the bottom up in most states. Local communities submit recommendations to state government, which forwards a final list to Treasury by September 28, 2026. Mennone notes that little suggests Treasury will override state selections. “Treasury just wants to know from the state government offices where you want your zones to go,” she says.

Florida extended its original deadline after receiving more feedback than expected. The state has not yet released its proposed list publicly, though Kern Mennone’s understanding is that Florida plans to do so when it submits to Treasury, a best practice she recommends so that investors have visibility into what is happening between state and federal levels.

The Education Gap

Only five seated governors were in office during the last designation round. That turnover means most state leadership is encountering this process for the first time, and so are many local officials and economic development professionals who need to understand what a designation actually means for their communities.

Some states have handled this well. Texas has run an organized process. Oregon hosted office hours where state staff answered questions from economic development professionals outside the Capitol. But fewer than six states have yet to engage their local communities at all, putting the decision behind closed doors.

Kern Mennone describes herself as “the designation diva” in the OZ space, a role that emerged partly because communication between state points of contact was limited. “I see the designation process as an education process,” she says, “especially for rural America, where they’re reliant upon the state government to essentially help explain to them what this opportunity zone designation means in the first place.”

What Developers Get Wrong

The most common mistake Kern Mennone sees is developers making assumptions about the program based on limited exposure. The vast majority of 1.0 investment went into housing, a natural fit given the national housing shortage and the straightforward development timeline residential projects offer. But the program applies to any real estate class and to operating businesses, excluding only “sin businesses” like liquor stores, massage parlors, and golf courses.

“There’s more you can do with opportunity zones than you can’t do,” Kern Mennone says. The original legislative intent was to support operating businesses, not just real estate development, a dimension that remains underutilized.

Transition Rules and What’s Holding Capital Back

Two provisions took effect immediately upon the bill’s signing: annual reporting requirements for early 1.0 investors, and enhanced rules for rural OZ investing. Under the program, “rural” is defined as any area with fewer than 50,000 people. The entire state of West Virginia qualifies under that standard.

But the broader 2.0 rules won’t take effect until 2027, and Treasury has not yet finalized transition guidance for investors navigating between the two rule sets. Some investors are waiting rather than deploying capital under the old framework. Kern Mennone says approximately 41,000 individual taxpayers had made OZ investments through 2024, and the industry wants definitive guidance “sooner rather than later so that people can plan.”

The Gentrification Critique

Critics have raised concerns about gentrification resulting from directing private capital into distressed communities. Kern Mennone’s response is structural: unlike LIHTC or New Market Tax Credits, where a government agency underwrites and directs where development goes, OZ investing is self-selected by private investors. No government body approves or assigns specific projects.

That self-directed nature can feel to local officials like they have no say in what happens. But Kern Mennone points out that OZ investing doesn’t exempt developers from zoning, building codes, or master planning. “Those things already drive private sector development,” she says. “It doesn’t really matter to me where the capital comes from to do the development work. I’d rather have economic development capital come from the private sector than the public sector.”

What This Means for Investors

For high-net-worth individuals and family offices, Kern Mennone’s advice is direct: now that the program is permanent, there is “kind of no excuse not to pay attention to it.” Many family offices are beginning to set up their own qualified opportunity zone funds, harvesting capital gains into a vehicle they own and control. “It’s a good wealth management practice,” she says.

The practical constraint is timing. States must submit their lists by September 28, and Treasury still needs to finalize transition rules before investors can plan with certainty around the 2.0 framework. For developers and investors watching Florida specifically, public release of the state’s proposed list will be the first concrete signal of where OZ capital can flow for the next decade.

About the Expert: Frances Kern Mennone is Managing Director at Industry Consultants & Advisors within FBT Gibbons, an AmLaw 200 firm based in Cincinnati.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.