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Multifamily Residential Development Continues to Dominate QOF Investment Tracked by Novogradac

Published by John Sciarretti on Tuesday, February 6, 2024 - 12:19PM

Residential investment–specifically multifamily housing–continued to be the leading area of investments in 2023 for qualified opportunity funds (QOFs) tracked by Novogradac.

QOFs tracked by Novogradac reported a total equity raise of $37.62 billion at the end of 2023, with $3.53 billion of that coming in the previous 12 months. That was a 10.4% increase over the total at the end of 2022.

Of that total, $20.52 billion is identified to be invested (or has already been invested) in multifamily housing–in 972 different developments. Of all identified investments by QOFs tracked by Novogradac, 71.2% has gone into properties that included multifamily housing. Identified investments are funds deployed or declared to be deployed for specific properties. They are the actual investments by QOFs, rather than the goal for where the fund may invest. 

QOFs are the investment vehicle through which taxpayers invest capital gains to qualify for deferral and other tax benefits. Novogradac collects data on a rolling basis from QOFs that voluntarily provide information as well as gathers information from public sources such as Security and Exchange Commission filings and press releases. The QOF figures reported by Novogradac don’t include proprietary or private funds owned and operated by their principal investors. Actual opportunity zones (OZ) investment is likely greater than the Novogradac total by a figure of three or four times.

As of Dec. 31, 2023, Novogradac was tracking 1,874 QOFs, with 1,461 reporting a specific equity amount. QOFs raised $414 million in equity in the fourth quarter.

Blog Graphic: Total Equity Raised in Each Category

As has been true for the history of the incentive, residential properties are the target of the most investment. Residential-only QOFs reported equity of $8.10 billion, nearly four times the No. 2 area (commercial, which raised $2.20 billion for commercial-only QOFs). 

On a broader scale, at the end of 2023 residential was at least a part of the focus for QOFs that raised $30.93 billion, while commercial was at least a part of the focus for QOFs that raised $24.93 billion. Hospitality ($4.08 billion for some focus; $741.3 million for specific focus), renewables ($2.18 billion for some focus, $179.6 million for specific focus) and operating businesses ($1.12 billion for some focus, $296.0 million for specific focus) round out the investment focus.

Due to overlaps (such as residential and commercial in a mixed-use project), the sum of the funds raised by QOFs with various foci is greater than $37.62 billion.

Novogradac also tracks the number of housing units created by QOF investment by city. At the end of 2023, QOFs tracked by Novogradac had created 171,976 housing units in 201 cities (the city is unidentified for 9,329 units of housing). Nine cities have seen at least 4,000 housing units funded by QOFs tracked by Novogradac:

  • Washington, D.C. (8,708),
  • Nashville, Tennessee (7,439),
  • Austin, Texas (5,167),
  • New York (5,054),
  • Los Angeles (4,920),
  • Cleveland (4,622),
  • Phoenix (4,582),
  • Charlotte, North Carolina (4,442), and
  • Atlanta (4,071).

Among QOFs tracked by Novogradac, there were 28,701 additional housing units created in 2023, increasing the number of housing units by 20.1%.

In terms of identified commercial investment, QOFs invested $8.09 billion in retail, $5.12 billion in office space, $2.24 billion in industrial and $2.11 billion in mixed-use properties (some of which may include investment in the other commercial areas).

The information contained in this blog post is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy securities. Novogradac does not provide investment advice and the information in this report is not to be construed as a recommendation to engage in any specific transaction. Readers are urged to consult with their own professional advisors if they are considering investing in a QOF.

Related Blog Posts

QOFs Report $3.53 Billion Jump in 2023 Equity, Moving Total Beyond $37 Billion

Los Angeles and California Solidify Spots as Top Targets for QOF Investing

QOF Bifurcation: Largest Funds are Fewer in Number, but Raise Most of Equity

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