Federal policy changes aim to boost affordable housing production.
Highlights:
- Opportunity Zone and Difficult Development Areas encompass 6.4 million units nationwide.
- Of these, 5.1 million are market-rate and 1.3 million are fully affordable.
- Under construction and planned units across OZs and DDAs add up to 348,000 units.
- The figure might grow larger through policy alterations that expand OZs and enhance the eligibility to attain DDA benefits.
Policy changes further emphasize location for affordable housing
Federal policies changed throughout 2025, placing greater emphasis on a property’s location, aligning capital with local affordability needs. These measures include the Opportunity Zone program extension and LIHTC improvements in the 4 and 9 percent categories, as well as an increase in eligibility for Difficult Development Area benefits. These enactments aim to improve the feasibility of projects in low-income and high-cost areas through the OZ and DDA programs, respectively.
DDAs debuted together with the LIHTC program in 1986, whereby such areas would provide developers with additional tax credits, should their project qualify for LIHTC. Projects inside DDAs could be eligible for a 30% basis boost, increasing equity and reducing debt exposure in areas where land, materials and operating costs are prohibitive to development. Companies pursued DDA affordable projects across Sun Belt markets that witnessed strong population growth and high construction costs, which narrowed margins. Phoenix is one such example, where planned and underway apartments make up 90 percent of affordable DDA stock.
OZs propose attracting development in low-income areas instead, and they offer tax incentives in exchange. A clear-cut example of an OZ-bolstered pipeline is found in Salt Lake City, where 1,656 fully affordable units are under construction, representing 27.2% of total stock. Austin is another such market, in which suburban expansion and an inflow of migration fostered an environment for a strong construction cycle across OZs. Austin’s 1,984 fully affordable units account for 21.1% of inventory, a share higher than Columbus (16%) and Raleigh-Durham (12.7%).
Two complementary, non-competing incentives
Nationally, OZs and DDAs encompass 6.4 million apartments, of which 5.1 million are rented out at market-rate, while the remaining 1.3 million are income-restricted. The potential for growth is high, with 348,000 units across all stages of development found throughout OZs and DDAs combined. The extent to which the federal policy changes will bolster production depends on interest rates, capital availability and construction labor constraints, as well as local entitlement environments. Yet, what is certain is that such incentives not only influence whether projects pencil out but also dictate where capital concentrates.
DDAs and OZs are complementary tools, rather than competing policies. Understanding the nuances and differences between the two is imperative for market participants to reduce risk and improve capital efficiency. Therefore, figuring out which incentive best aligns with a market’s underlying cost, demand and capital dynamics is a task that befalls investors and developers. Participants who choose construction sites, underwrite and deploy capital accordingly, will align to better capture the next wave of affordable housing production, according to Paul Fiorilla, director of research at Yardi Matrix, and Jacob Gonzales, senior research analyst.
Read the full Yardi Matrix Affordable Housing Market Report: January 2026.
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