Land banks - a municipality's new tool in its fight against housing decay.
Land banking is a relatively new concept developed in the face of rising cases of "zombie" properties that blight our towns, boroughs, hamlets and cities. If you have never heard of a land banking, here are some
Frequently Asked Questions on Land Banking
1) What is a land bank?
Land banks are governmental entities or nonprofit
corporations that are focused on the conversion of vacant, abandoned, and tax
delinquent properties into productive use.
2) How are land banks created?
Typically, land banks are created as public entities by a
local ordinance, pursuant to authority provided in state-enabling legislation.
Land banking programs can also be developed within existing entities, such as
redevelopment authorities, housing departments, or planning departments.
3) How many land banks are operating throughout the country?
Based on our knowledge of and experience within the field of
practice, we estimate there are approximately 250 land banks and land banking
programs in operation throughout the country (as of July 2021). The states of
Michigan, Ohio, Georgia, Pennsylvania, and New York currently have statewide
land bank associations that represent their large numbers of active land banks.
For a national inventory of land banks and land banking programs, check out our
new Land Bank HQ Interactive Map. [See below for more information - ed.]
4) How does land banking work?
Land banks are designed to acquire and maintain problem
properties and then transfer them back to responsible ownership and productive
use in accordance with local land use goals and priorities, creating a more
efficient and effective system to eliminate blight.
5) Aren’t land banks competing with the private market, with an unfair advantage?
Not so. In fact, a land bank is a direct response to a
growing inventory of problem properties that the private market has altogether
rejected. Most vacant and abandoned properties have serious legal and financial
barriers that detract responsible, private investors. For instance, many
abandoned properties have a clouded title, which introduces a level of uncertainty
and liability few responsible investors, if any, are willing to assume. Also,
many tax-foreclosed properties have accumulated years of back taxes that far
exceed the market value of the property. Similarly, many properties left vacant
and abandoned for too many years require an investment in repairs that greatly
exceeds what the market could ever return. A land bank, therefore, is designed
specifically to address the inventory of problem properties the private market
has discarded, and to convert these neighborhood liabilities into assets that
advance community-based goals.
6) When does it make sense to use land banking?
Any community considering the creation of a land bank should
assess a number of factors to determine if a land bank is needed or likely to
be successful. Some common triggers for creating a land bank include:
Properties with little to no market value
Properties with delinquent taxes in excess of fair market
value
Properties with title problems
Inflexible policies that dictate the disposition of public
property, denying local governments the chance to be strategic and nimble
The speculation and uncertainty inherent in the auction sale
of tax-foreclosed properties
Some jurisdictions may already have an entity or agency (e.g. a redevelopment authority) that is empowered with tools to effectively take control of large inventories of problem properties and return them to productive use, obviating the need for a land bank. In some cases, however, such entities are focused primarily on development, rather than on blight elimination and stabilization strategies in more distressed neighborhoods. Where this is the case, the community may still want to consider creating a land bank or land banking program.
7) What does a typical land bank program look like?
While all land banks exist to serve the same primary purpose
of acquiring problem properties and returning them to productive use, they are
quite diverse in their structure and operations. We estimate there are
approximately 170 land banks and land banking programs in operation throughout
the country (as of January 2018), and they vary greatly in terms of the types
of cities, regions, and economic conditions in which they operate, the size of
their inventories, their staff capacity, their legal authorities, and their
goals and programs. Despite this diversity, our experience has shown that
successful land banks exhibit some similar characteristics:
A land bank is not a panacea for all problems associated with blight, or even a necessary entity in many cities, but in the right environment and with the right legal structure, a land bank can be a key tool for returning vacant and problem property to productive use.
8) What are some of the core powers of a land bank?
Depending on state and local law, land banks often have
unique legal powers to support their activities and facilitate the return of
problem properties to productive use. Though these statutes differ widely from
state to state, they generally grant the following powers:
Obtain property at low or no cost through the tax foreclosure
Hold land tax-free
Clear title and/or extinguish back taxes
Lease properties for temporary uses
Negotiate sales based not only on the highest bid but also
on the outcome that most closely aligns with community needs, such as workforce
housing, a grocery store, or green space
Using these special powers, land banks can streamline blight removal and create a nimble, accountable, and community-driven approach to returning problem properties to productive use.
9) How is a land bank different from a redevelopment authority?
In a few states, legislation has been passed that grants
redevelopment authorities many of the same powers as land banks. In Louisiana,
for example, some redevelopment authorities can also function as land banks.
However, in most states, redevelopment authorities and land banks differ both
in terms of their legal powers and their mission. Land banks typically
implement disposition policies that allow greater flexibility than a
redevelopment authority in terms of transferees and consideration. However,
unlike many redevelopment authorities, land banks do not have the power of
eminent domain, nor do land banks have the power to tax. As for mission, many
land banks are focused on acquiring, stabilizing and returning to productive
use those properties that are considered to have the most blighting influence
in a community. These are properties that may not have an immediate
redevelopment opportunity, but are destabilizing neighborhoods and undermining
quality of life. In comparison, a redevelopment authority is typically focused
on properties with near-term redevelopment potential and on large scale development
projects that align with highly visible and long-term economic development
goals.
10) How is a land bank funded?
Land banks are generally funded through a variety of
sources, which may include revenue from the sale of properties, foundation grants,
general fund appropriations from local and county governments, and federal and
state grants. Land banks in certain states have received significant funding
from the federal Hardest Hit Funds (for example, Michigan and Ohio) and the
National Mortgage Settlement Funds (for example, New York and Illinois).
11) How many properties do land banks generally have in their inventory at any given time?
Land bank inventories vary greatly from jurisdiction to
jurisdiction. Inventory sizes range anywhere from a few properties to thousands
of properties. Reasons for this variation include the size of the community in
which the land bank is located, the level of distress and disinvestment in each
community, the land bank’s property acquisition process, strategy, and
authorities (including whether state law grants the land bank the authority to
pick and choose which properties to acquire out of tax foreclosure), and the
mission and goals of the land bank.
12) What kinds of properties do land banks acquire?
Most land bank acquisitions are vacant, residential,
tax-delinquent properties. In addition to tax foreclosed parcels, land banks
can acquire Real Estate Owned (REO) properties and receive private donations
and public land transfers. Although most properties are typically vacant
residential single-family homes or vacant lots, land banks also acquire
multifamily dwellings, commercial and industrial properties, and in rare cases,
occupied rental properties. In fact, some land banks even have well-developed
brownfields programs through which they acquire large scale, formerly
industrial properties.
Keywords land bank foreclosures zombie
The information included is designed for informational purposes only. It is not legal, tax, financial or any other sort of advice, nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate in parts. It is the reader’s responsibility to comply with any applicable local, state, or federal regulations. Vested Land Services LLC and their employees make no warranties about the information nor guarantee of results, and they assume no liability in connection with the information provided.
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