Why Houston Gets 631 OZ Tracts While NYC Builds 9,700 New Homes

[Alexander Szikla]

Goodbye summer, hello foliage! Hope Labor Day wasn't too laborious for my readers, with impending rate cuts Q4 should sure be an interesting way to end the year. Federal incentives are getting smaller and more competitive. Cities are rezoning at unprecedented scale. Capital is flowing again. The convergence creates a narrow window for outsized returns—but only for those who move fast. Three powerful forces are reshaping American real estate, and their intersection over the next 18 months will determine winners and losers for the decade ahead. Opportunity Zones Get Serious Opportunity Zone 2.0 isn't just policy reform—it's a complete geographic realignment. The program shrinks from 7,800 zones to 6,300, tightens income thresholds from 80% to 70% of median family income, and eliminates the "contiguous tract" rule that let benefits creep into affluent areas. Houston emerges as the clear winner with 631 eligible tracts—a fivefold increase that represents 21% of all Texas zones. This concentration isn't accidental. The original program delivered 68,000 additional apartment units worth $18 billion, proving targeted incentives work when properly deployed. The new framework launches January 1, 2027, but governors must submit designations by July 2026. The clock is ticking.

Cities Embrace Radical Rezoning While Washington refines its incentives, cities are taking direct action. NYC's Midtown South Mixed-Use Plan—the largest rezoning in two decades—will create 9,700 new homes including 2,800 affordable units, backed by $488 million in infrastructure investment. This isn't just housing policy, it's economic transformation. Manhattan's commercial core is becoming residential, with Hudson Yards Phase 2 adding 4,000 homes, office-to-resi conversions like 5 Times Square delivering 1,250 units, and the former Pfizer headquarters planning 1,602 apartments. The message is clear: traditional commercial districts must evolve into mixed-use neighborhoods or risk obsolescence. Capital Markets Surge Despite Uncertainty The fuel behind this transformation? Money is flowing again. CBRE's Lending Momentum Index jumped 45% year-over-year to 275, driven by alternative lenders who now command 34% of the non-agency market. Credit is loosening fast. Loan-to-value ratios hit 63.3%, debt service coverage fell to 1.34, and agency multifamily lending surged to $28.9 billion—up 43% year-over-year. Fixed rates averaging 5.7% for GSE loans make multifamily development the most attractive financing option available. The Perfect Storm These forces aren't developing in isolation—they're reinforcing each other. Houston's OZ dominance becomes more valuable with accessible capital. NYC's rezoning gains momentum from alternative lenders willing to finance complex projects. Federal incentives multiply when cities provide regulatory frameworks for ambitious development. The timing is everything. OZ 2.0 opens just as lending momentum peaks and cities complete major rezoning initiatives. This convergence creates opportunities that won't exist again for decades. The next 18 months are critical. Geographic winners are emerging: Houston combines demographic growth with federal incentives, while New York reimagines its urban fabric through aggressive rezoning. Markets lacking policy frameworks or political will to embrace change risk being left behind. For real estate professionals, this isn't another market cycle—it's a fundamental reshaping of American urban development. The intersection of federal incentives, local planning, and capital availability creates a narrow but potentially lucrative window.