Federal tax incentives are transforming how developers approach urban revitalization. Among these tools, Opportunity Zones (OZs) have emerged as a powerful way to attract private capital into neighborhoods that need it most, while Difficult Development Areas (DDAs) help make high-cost markets more feasible for new housing. Together with expanded Low-Income Housing Tax Credits (LIHTC) and improved access to financing for rehabilitation projects, these incentives are reshaping the development landscape across the United States.
At Urban Catalyst, we see firsthand how Opportunity Zones can accelerate meaningful development. By leveraging these incentives in downtown San Jose, we are helping to transform underutilized areas into vibrant hubs of housing, retail, and office space, delivering much-needed housing to support the city’s growing population and evolving urban economy.
The National Impact of Opportunity Zones
Opportunity Zones have become a consistent driver of development since 2017. Key statistics illustrate their impact:
- 600,000 multifamily units have been completed in Opportunity Zones nationwide
- 205,000 units are currently under construction in OZs and DDAs
- 143,000 units are in the planned stage
- Combined, 348,000 units represent over 5 percent of existing housing stock in these designated areas
- Fully affordable units account for 12.7 percent of pipeline growth, compared with 3.5 percent for market-rate units
Cities such as Salt Lake City and Austin show how Opportunity Zones concentrate investment. Salt Lake City OZ tracts have 1,656 fully affordable units under construction, more than a quarter of the area’s completed stock, with an additional 2,700 units in planning. Austin has nearly 2,000 affordable units underway with a substantial planned pipeline.
Even smaller metros like Columbus and Raleigh-Durham illustrate how OZ incentives attract capital to neighborhoods poised for growth, supporting residential development and local employment.
DDAs: Making High-Cost Markets Work
While Opportunity Zones focus on directing capital to growth-oriented neighborhoods, DDAs help projects succeed in high-cost areas where construction and land expenses can otherwise prevent development.
- In Phoenix, DDA units under construction would increase housing stock by over 40%, with the forward pipeline nearly doubling current inventory
- In Sacramento and Southwest Florida, DDA-designated projects make up a significant portion of the development pipeline, enabling projects to proceed in markets with rising costs
Tools such as the 30% basis boost in LIHTC calculations allow developers to raise additional equity without increasing rents, expanding the feasibility of housing in cost-constrained markets.
Urban Catalyst: Delivering Much-Needed Housing in San Jose
Urban Catalyst leverages Opportunity Zones in San Jose to translate federal incentives into tangible development outcomes. Our projects focus on mixed-use development, combining multifamily housing, retail, office space, and extended-stay hotels within Opportunity Zone tracts.
Key contributions include:
- Delivering much-needed housing to meet San Jose’s growing population
- Revitalizing underutilized neighborhoods into active, vibrant urban hubs
- Supporting local businesses and creating construction and service-sector jobs
- Aligning development with city growth trends and market demand
Urban Catalyst shows how Opportunity Zones can accelerate housing development across the spectrum, creating neighborhoods that meet the needs of residents and strengthen the broader economy.
Sources:
Data and insights referenced in this blog are based on Yardi Matrix, National Affordable Housing Report, January 2026
Important Disclosures
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by an issuer, or any affiliate, or partner thereof ("Issuer").
All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM.
With respect to any performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. Assumptions are more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment.
These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified.
Past performance are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.
Real Estate Risk Disclosure:
- There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.;
- Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
- Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
- Potential for foreclosure – All financed real estate investments have potential for foreclosure;
- Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
- Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
- Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits
- Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.
Opportunity Zone Disclosures
- Investing in opportunity zones is speculative. Opportunity zones are newly formed entities with no operating history. There is no assurance of investment return, property appreciation, or profits. The ability to resell the fund’s underlying investment properties or businesses is not guaranteed. Investing in opportunity zone funds may involve a higher level of risk than investing in other established real estate offerings.
- Long-term investment. Opportunity zone funds have illiquid underlying investments that may not be easy to sell and the return of capital and realization of gains, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investments.
- Limited secondary market for redemption. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive typically is discounted to current valuations.
- Difficult valuation assessment. The portfolio holdings in opportunity zone funds may be difficult to value because financial markets or exchanges do not usually quote or trade the holdings. As such, market prices for most of a fund’s holdings will not be readily available.
- Capital call default consequences. Meeting capital calls to provide managers with the pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could elicit significant adverse consequences, including, without limitation, the forfeiture of your interest in the fund.
- Opportunity zone funds may use leverage in connection with certain investments or participate in investments with highly leveraged capital structures. Leverage involves a high degree of financial risk and may increase the exposure of such investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the assets underlying such investments.
- Unregistered investment. As with other unregistered investments, the regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities.
- It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable realize any tax benefits. You should evaluate the merits of the underlying investment and not solely invest in an opportunity zone fund for any potential tax advantage.
The above material cannot be altered, revised, and/or modified without the express written consent of Urban Catalyst.
