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Land Banks: Preventing the Next Generation of Ghost Towns?

January 17, 2012

Population losses, the mortgage foreclosure crisis, and general urban decay have left neighborhoods around the United States abandoned and unoccupied. Abandoned property can result in chronic problems for both the remaining property owners, who are faced with reduced property values and an increased criminal presence; and municipalities, which can find itself with lower property tax revenues and an increased demand for public safety services.

In order to cope with these problems, governments have taken a renewed interest in Land Banking. The idea of land banks is not new (the earliest contemporary land bank was established in St. Louis in 1971), however, in the wake of the Great Recession, many state and local governments are taking a harder look at land banking as a way to stabilize reeling metropolitan areas.  

Land Banking refers to the policy where local governments, through a public development authority or other public agency, acquire abandoned property and then either convert the property into a productive use (through renovation, demolition, sale, or other means), or hold the parcels for long term land use planning. When disposing of property, land banks don’t operate in the usual sell-to-the-highest-bidder-as-quickly-as-possible mentality that plagued tax foreclosure sales (which usually resulted in the properties going to vacant landlords), instead, most land banks are guided by disposition policies which favor buyers who can help the long-term revitalization of the community, such as charities or nonprofits. Each land bank has different policies and prerogatives to accommodate the distinctive needs of each municipality.

Probably the most well-known “modern” land bank is the Genesee County Land Bank Authority (GCLBA), located in Flint, Michigan. Through state legislation, the GCLBA is able to take clear title to abandoned property in half the time, eliminating tax liens and resulting in hardship postponements. The GCLBA then has a variety of programs the abandoned lot can find itself in: demolition, housing renovation and rental, sales, side lot transfer (a program where the adjacent property owner may purchase the vacant lot for $25 plus fees), as well as a variety of gentrification programs. The GCLBA’s disposition of property is governed by a variety of policies which favor nonprofit, government, or charitable buyers who present the best opportunity for continued neighborhood revitalization. The GCLBA has acquired and encouraged the re-use of more than 4,000 residential, commercial, and industrial properties since its inception. However, continuing financial woes of both Flint and the GCLBA leaves the overall effectiveness of land banks in question.

Regardless, an effectively implemented land bank is believed to offer municipalities a number of benefits, including: acting as a catalyst for economic development, stabilizing municipal finances through both increased (or stablized) tax receipts and the decreased need for public safety expenditures; expanded housing opportunities, decreased criminal activity, and a decreased number of public nuisances. Although the results of land banks are subject to interpretation, a 2009 report issued by the U.S. Department of Housing and Urban Development has noted the benefits of land banks in Michigan, Maryland, and Georgia. Additionally, recent legislation in New York and pending legislation in Pennsylvania, among other states, suggests that land banks could be more widespread in the future.

A more in-depth explanation of Land Banks, all by Professor Frank S. Alexander, can be found here (from the Journal of Affordable Housing), here (from the Brookings Institute), and here (from the Center for Community Progress).

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