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.
Vacant, abandoned, and tax-delinquent properties are often
grouped together as “problem properties” because they destabilize
neighborhoods, create fire and safety hazards, drive down property values, and
drain local tax dollars. In some sense, these are properties the private market
has altogether rejected.
Land banks, in essence, are a direct response to this
growing trend of vacancy and abandonment, created to strategically acquire
problem properties and convert these liabilities into assets. In short, land
banks are intended to acquire title to these problem properties, eliminate the
liabilities, and transfer the properties to new, responsible owners in a
transparent manner that results in outcomes consistent with community-based
plans.
Most land banks have special powers (see below) that enable
them to undertake these activities more effectively and efficiently than other
public or nonprofit entities. When thoughtfully executed, land banking can
resolve some of the toughest barriers to returning land to productive use,
helping to unlock the value of problem properties and converting them into
assets for community revitalization.
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.
In order to accomplish these tasks, land banks are granted
special powers and legal authority pursuant to state-enabling statutes. Though
these statutes differ widely from state to state, the more recent examples of
comprehensive land bank legislation generally grant to land banks the following
powers:
We want to stress that a land bank is not a “silver bullet”
for communities struggling with blight. Though land banks are uniquely designed
to help reduce problem properties, the policies, priorities, and activities of
a land bank must complement other community strategies and activities, such as
strategic code enforcement, smart planning and community development, and
effective tax collection and enforcement.
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:
Large inventories of vacant and abandoned property
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:
Strategic links to the tax collection and foreclosure
process. Tax delinquency is often the most significant common denominator among
vacant and abandoned properties, which explains why nearly all land banks have
established strategic links to the tax foreclosure process as a primary source
of acquisitions. This is particularly in communities where (a) a primary cause
of vacancy and abandonment is an ineffective tax foreclosure process and (b)
where there are statutory powers, intergovernmental agreements or policies in
place for a land bank to acquire properties through the tax foreclosure process
at little to no cost. Though auctions can generate positive outcomes for
marketable properties, the speculative auction rarely if ever leads to positive
outcomes for problem properties. Land banks can and should play a key role in
acquiring and converting tax-foreclosed properties to productive use.
Operations scaled in response to local land use goals.
Successful land banks have established acquisition and disposition strategies
that directly support the implementation of local land use goals and meet
community needs. Some land banks tackle massive inventories of extremely unsafe
and abandoned properties as part of an urgent stabilization and public safety
strategy, while others operate selectively with extreme deliberation.
Regardless of the scale of operations, land banks should always make decisions
based on a strong understanding of community priorities and goals, and guided
by neighborhood, local and regional revitalization plans.
Policy-driven, transparent, and publicly accountable
transactions. The acquisition and disposition of properties – especially those
that have long been harmful eyesores – is an important and sensitive endeavor.
Successful land banks have gone to great lengths to build and maintain trust
with the public through complete transparency in the establishment of
priorities, policies, and procedures that govern all actions. Land banks should
make sure these ground rules and policies are established prior to any
transactions, and annually revisited with public input to maintain a high
standard of transparency and accountability. Moreover, land banks should strive
to create websites that offer members of the public full access to accurate,
up-to-date information pertaining to all land bank operations, programs,
policies, and activities, including sales listings and past transactions.
Engagement with residents and other community stakeholders.
There is no substitute for engaged community stakeholders who understand a
community’s history and goals — and whose lives are most directly by a land
bank’s work. Successful land banks have found creative and consistent ways to
inform, engage, and empower these active residents to help prioritize land bank
interventions and develop long-term solutions. Whether establishing a community
advisory board or regularly hosting neighborhood meetings, land banks should
explore and implement practices that affirm a strong commitment to
inclusiveness, engagement, and empowerment.
Alignment with other local or regional tools and community
programs. Because a land bank is a tool to support locally developed land use
goals, and not a goal in and of itself, it is important to coordinate with
other blight prevention tools and programs. Successful land banks have helped
facilitate and work within diverse collaborations across the public, private,
and nonprofit sectors that share similar economic and community development
goals. We can’t stress enough that, in order to truly be effective, land bank
activities must complement existing blight prevention efforts, including
effective tax enforcement, strategic code enforcement, neighborhood
investments, and community-based planning.
Recurring, reliable source of funding. A land bank’s focus
is on the inventory of problem properties the local property market has
basically rejected, and therefore will always require some level of public
support—whether cash or in-kind—that is proportional to the scope and scale of
vacancy the land bank is expected to help resolve. With a recurring and
reliable source of funding, land banks can focus on the types of creative
interventions and community partnerships that are required to transform
liabilities to productive use that meet and advance community goals.
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).
A couple of financing mechanisms unique to land banks have
been included in state-enabling legislation. For instance, in Michigan and New
York, land banks are able to recapture 50% of the taxes on properties returned
to the tax rolls for five years. In Ohio, special fees imposed on delinquent
taxpayers provide a dedicated source of funding for land bank operations.
Finding consistent and preferably dedicated funding sources is critical to the
success of land banks, as they incur significant costs converting unsafe
liabilities the private market has rejected into assets that improve
neighborhood vitality. Several of the more successful land banks from around
the country are also capitalized by their local units of government either
through yearly budget allocations or in-kind assistance such as shared
staffing.
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.
See more at https://www.communityprogress.net/land-banking-faq-pages-449.php#What%20is%20a%20land%20bank?
Keywords land bank foreclosures zombie
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