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.
What are the 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.
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. (Act 33 of 2018) 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.
What 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.
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.
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.