Opportunity Zones 2.0: What States Need to Know Now

The National Governors Association (NGA) and America Forward recently convened state economic development officials, researchers and investment experts to take stock of what Opportunity Zones (OZs) accomplished in their first round and what states should do differently as the new designation window opens July 1, 2026. This is the first part of ongoing work by NGA and AmericaFWD to support Governors efforts around Opportunity Zones. More than 30 states and territories heard from Dr. Tracy Loh of the Brookings Institution, Jill Homan representing the Opportunity Funds Association, and state officials from Maine and Tennessee. Here is what we learned.

The Evidence Is In: OZs Worked, But Unevenly

New unpublished research from the Brookings Institution offers the most complete picture yet of what the program actually produced. The headline finding is cautiously optimistic: designated tracts saw a meaningful rise in building activity, and the share of national construction occurring inside OZ tracts increased. But the program did not bring low-income tracts to parity with the broader market, and the gains were far from evenly distributed. Capital concentrated heavily in tracts that were already attracting investment before designation, and the median zone saw no change at all.

That said, a meaningful share of zones experienced genuine growth without residential displacement, pushing back on one of the program's most persistent criticisms. The research found no evidence that OZs caused gentrification. Displacement was equally likely in high-growth and no-growth zones alike.

What separated thriving zones from stagnant ones? The strongest predictors of success were tracts already growing, with available land and active small business lending. Capital followed capital. Perhaps most importantly, state-level outcomes varied enormously. What states did with this program - how they designated, how they engaged stakeholders, how they built supporting ecosystems -made a measurable difference.

What's New in OZ 2.0

The most consequential change in OZ 2.0 is permanence. This is no longer a one-time incentive to be managed and forgotten; it is an ongoing economic development program that should be integrated with existing state tools and institutionalized accordingly.

The other major structural change targets the program's most glaring 1.0 shortcoming: the vast majority of investment flowed to urban areas despite substantial rural designations. OZ 2.0 responds with a tripled basis step-up and a minimum designation threshold for rural zones, designed to make rural investment more attractive to private capital. States should also review the U.S. Department of the Treasury's recently published transitional guidance clarifying how OZ 2.0 works and how it interacts with the original program before submitting designations.

How to Designate Well

The designation window opens July 1, and the pressure to move quickly is real; but speed without strategy is a wasted opportunity. Panelists were consistent on what good designation looks like.

Prioritize tracts that are reform-ready. Private capital moves where the path to investment is clear: tracts with streamlined permitting, responsive local governments and a demonstrable appetite for development. Require documentation, especially for redesignations from 1.0. Feasibility studies, evidence of investor interest and clear articulation of community needs should all be part of any submission. "It was designated before" is not sufficient justification when slots are scarce. Additionally, it is important to submit early. Beginning the designation process at the opening of the window allows for more collaboration with the IRS. States that announce their zones earlier begin attracting investor attention sooner, a real competitive advantage in a program driven entirely by private capital.

Building a Program That Lasts

With a significant number of governors' seats open this election cycle, many officials currently making designation decisions may not be in their roles when 2.0's investment activity unfolds. Building frameworks that outlast any particular administration is critical.

The states that succeeded most in 1.0 shared a common thread: sustained, systematic outreach and education. Tennessee conducted in-person meetings statewide, hosted networking events connecting project sponsors with capital and helped communities understand how to stack OZ equity with other available incentives. Maine moved early on housing investment signals that gave investors confidence and spent months engaging developers, accountants and Community Development Financial Institutions ahead of the first window. Neither outcome happened by accident.

The single highest-leverage action any state can take is making OZ coordination someone's explicit, full-time job. The models are proven. For example, Opportunity Alabama and Baltimore both punched well above their weight by dedicating focused, daily attention to connecting projects with capital. States should also develop plain-language resources for small local investors, who often have the deepest community commitment and the least access to specialized counsel.

OZ 2.0 is a genuine second chance. The research is clear that what states do matters. The window is open, and the work starts now.