A federal tax break that helped pay for apartment buildings in Tacoma and Bremerton the first time around is getting a second round, and Washington has picked where it wants the money to go.
Gov. Bob Ferguson announced Oct. 8 that he had nominated 99 low-income and rural areas across the state for the federal Opportunity Zones 2.0 program, according to the governor's office. The nominations cover 27 counties and 17 tribal lands. They were chosen from 152 applications, and 36 of them are in rural communities.
The program gives investors, developers and financial institutions tax incentives for funding real estate development and businesses in the designated areas. The governor's office says the first round, launched in 2018, spurred an estimated $100 billion in private investment nationwide.
"Opportunity Zones help shine a light on communities that have exceptional potential for investors," Ferguson said.
The nominations followed months of public feedback and planning led by the state Department of Commerce, with input from business leaders and the state's 29 federally recognized tribes. For comparison, 139 areas across 36 counties were nominated in 2018 for the first round.
Seven Spokane neighborhoods
In Spokane, seven neighborhoods are on the list, Spokane Public Radio reported in its Oct. 14 news roundup: Emerson-Garfield, Logan, downtown, West Central, East Central, Chief Garry Park and Cliff-Cannon.
Steve MacDonald, the city's director of community and economic development, told SPR he expects the second version of the program to bring in housing, much like the first one did.
"We need all types of housing of any level, whether it's luxury, market, workforce, or very affordable," MacDonald said.
The governor's office pointed to a Spokane project as an example of what the program can support. The Peyton Lofts development is working to turn a 135-year-old office building into a 96-unit mixed-use residential community by the end of 2027.
Other examples from the first round include Kōz on MLK, a 161-unit affordable and workforce housing building in Tacoma's Hilltop neighborhood finished in 2022, and Marina Square in Bremerton, a waterfront project on a former parking lot with 270 homes and nearly 13,000 square feet of ground-floor retail, completed in 2023.
What changes in round two
The new program adds extra incentives for rural areas. Investors who hold a rural opportunity fund investment for five years get a 30% reduction in taxable value, compared with 10% in non-rural zones. Rural properties also need capital improvements equal to only 50% of their adjusted basis to qualify, down from the standard 100%.
Once certified, an Opportunity Zone 2.0 area keeps its status through Dec. 31, 2036. The zones from the first round stay active through Dec. 31, 2028, so the two programs will overlap for a while. Congress also added new reporting requirements so the program's results can be measured.
What happens next: the U.S. Treasury Department has to review and certify the nominations. SPR reported Treasury needs to certify them by Dec. 27, and the new zones are scheduled to take effect Jan. 1, 2027. The full list of nominated areas is available on the Commerce Department's Opportunity Zone dashboard.
Why it matters for Contractors
Opportunity Zones don't build anything by themselves. They give investors a reason to put money into projects in certain neighborhoods. But the program is built around real estate development and businesses, so when that money moves, a lot of it goes into construction: apartment buildings, office conversions, mixed-use projects and commercial space.
The state's own examples are construction projects: a 161-unit building in Tacoma, a 270-unit waterfront project in Bremerton, and an office-to-housing conversion planned in Spokane. MacDonald said he expects the next round to bring housing to Spokane, too.
The rural changes are worth watching. A lower improvement threshold in rural zones could make it easier for investors to pencil out renovations of existing buildings in small towns, which would mean more remodel and rehab work outside the big metro areas.
Commerce is encouraging investors to get their plans ready ahead of Jan. 1 so they can put money to work early in 2027. Contractors in Spokane and other nominated areas should check the dashboard, see which neighborhoods made the list, and start building relationships with the developers and funds who will be looking for builders.