By: Steven Molinari, Policy Analyst

May 18, 2026 — On May 11, HUD published Notice CPD-26-07, which provides guidance for community development program grantees in leveraging their funds in Opportunity Zone (OZ) designated areas.

The OZ initiative provides tax incentives to investors for commercial and industrial real estate, housing, infrastructure, and existing or start-up business investments. As outlined in the Tax Cuts and Jobs Act (TCJA) of 2017, it is meant to further drive private investment into designated low-income communities (LIC). Opportunity Zones, which are defined as economically distressed areas, get that designation from their state governors based on individual low-income census tracts.

OZ Initiative Changes

In this notice, HUD provides information on some of the changes of the OZ initiative since the passage of the One Big Beautiful Bill Act in 2025. Some changes include new LIC eligibility criteria, elimination of contiguous tracks, decennial redesignation of OZs, 25 percent designation cap on state eligible OZ designations, and aligning the U.S. designation cap for Puerto Rico as well.

Opportunity Zones initially designated, also known as OZ 1.0, is in effect through the end of 2028. A newly designated OZ map, also known as OZ 2.0, will become effective January 1, 2027 until the end of 2036. Changes made as part of the OBBBA will apply to designated OZs under OZ 2.0.

Application of CPD Programs

The notice provides program integration considerations for the following programs:

• Community Development Block Grant (CDBG) Program;
• Section 108 Loan Guarantee Program;
• CDBG Disaster Recovery (CDBG-DR);
• HOME Investment Partnerships (HOME) Program; and
• the Housing Trust Fund (HTF) Program

Some considerations as explained in the notice include:

CDBG

• Leveraging funding as part of capital stack to meet the requirements of the working capital plan; and
• Reducing reporting burden on grantees.

HOME

• Combining OZ tax benefits may make projects financially viable to private investors.

More examples are included in the notice here.

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