The Nonimpact of Opportunity Zones on Home and Business Lending

Michael Snidal and Guanglai Li

Housing Policy Debate, 2024, vol. 34, issue 3, 419-440

Abstract: Opportunity Zones (OZs) promised to stimulate investment in over 8,500 “distressed” neighborhoods. Have OZs increased neighborhood investment and, if so, what types of neighborhoods have benefitted? This study uses a difference-in-differences (DID) design to compare small business and residential lending outcomes in designated OZs with areas that were eligible but not designated. Census tracts are stratified by pretreatment social and economic indicators of distress to search for heterogeneity in effects by neighborhood type. An event study framework is used to check the parallel trends assumption and census tracts are then matched to improve the counterfactual. Finally, an adjusted interrupted time series (AITS) analysis is introduced to further evaluate differences in outcome indicator levels and trends between target and control neighborhoods pre and post OZ. DID and AITS estimates suggest that OZs have had no statistically significant effects on business or residential loan growth. Heterogeneity modeling confirms a noneffect across neighborhood distress type. In conclusion, study limitations and future extensions for both policy and research are discussed.

Date: 2024
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DOI: 10.1080/10511482.2022.2145852

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