Land Bank

Land banks are public authorities or non-profit organizations created to acquire, hold, manage, and sometimes redevelop property in order to return these properties to productive use to meet community goals, such as increasing affordable housing or stabilizing property values.

Land banks are most commonly established in localities with relatively low or declining housing costs and a sizeable inventory of tax-delinquent properties that the community wants to repurpose to support community goals. In high-cost localities, however, where there are few tax delinquent properties, land banks can serve as a vehicle for holding land purchased strategically for future affordable housing development.

Land Bank

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Land banks are a mechanism for acquiring, holding, and distributing property in service of community goals. Land banks, which can be government supported, quasi-governmental or independent non-profit organizations, obtain land through a number of different mechanisms: tax foreclosures, municipal government transfers, donations, or open-market purchases.

Land banks can also receive properties through voluntary donations from private owners or via transfers from municipal governments. Municipalities may have property acquired from foreclosure proceedings before the land bank was established, or may have surplus public properties.

In some jurisdictions, land banks help facilitate affordable housing development by temporarily holding properties while the original owners assemble financing and wait for the market to be ready for new development. Having the property held by the land bank can reduce or eliminate municipal taxes during the holding period. The land bank can also assume responsibility for property maintenance. In localities with cumbersome land management practices, land banks can provide more flexible management that may allow for interim uses or partnerships for community-stewardship.

Once acquired, the land bank manages the properties it owns. This can include mowing the grass, securing the property with locks or lights, or conducting an environmental clean-up. Land banks may also decide to rehab properties before selling them.

While land banks can hold properties, they typically seek to sell the properties to new owners. With the right enabling legislation, a land bank can clear the title and any liens against a tax delinquent property it owns so it can be sold with a clean title to the next owner. Land banks sell to developers and management companies, as well as to individuals and families. Land banks can sell individual parcels or assemble adjacent properties it has acquired into a package appropriate for a larger development, which may make the properties more attractive to developers. Finally, a land bank has discretion to establish criteria for eligible buyers and uses, for example, prioritizing nonprofit and mission-oriented developers who include affordable housing units in their proposals and agree to conditions that guide how the property will be developed, or requiring that owners occupy the property full-time for a minimum period of time, like ten years.

In localities with low-cost/low-demand housing markets (or with a mix of strong and weak housing submarkets), land banks typically focus on acquiring bank- and tax-foreclosed properties that sit vacant and abandoned. For various reasons, private market developers choose not to purchase these properties for development, leaving them untended in the community. Land banks can help return these properties to productive use and the tax rolls. For example, a locality could acquire deteriorating and vacant properties in a land bank and demolish a portion of them to clear land for a public park, renovate a portion to be sold as affordable housing, and sell another portion as market-rate housing as part of neighborhood revitalization strategy. In soft housing marketAlthough there is no standard industry definition, a softening market refers to any neighborhood, market area, or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times. (adapted from HUD)s where rehabilitation costs may exceed market prices, land banks can focus disposition strategies around concentrated or geographically-based neighborhood stabilization goals.

Cities, towns or counties with stronger housing markets can use land banks as a mechanism for purchasing and holding land for future use. For example, a community can purchase land in gentrifying neighborhoods to hold for future affordable housing development. Such land bank acquisitions can help ensure the availability of affordable housing even as land prices rise. While localities with strong housing demand typically have fewer problems with disinvestment and decline than other markets, land banks can also provide a mechanism to secure tax delinquent properties when such delinquencies occur, and hold these properties until they may be redeveloped as affordable or mixed-income housing or to meet other community needs.

Localities interested in land banking should first check to see whether their state has passed legislation to enable land banking. According to the Center for Community Progress, as of 2021, municipalities in 28 states have land banks, and 16 states have passed state-wide land bank enabling legislation.[1] In states that have not passed enabling legislation to give land banks greater power to acquire and dispose of properties, local governments can advocate for the passage of these laws. Land banks often require such legislation to overcome many of the legal and financial barriers that discourage private investment in abandoned, vacant, and tax-delinquent properties with which land banks typically deal with. The Center for Community Progress lists five core powers that should be granted to land banks in order for them to be effective:[2]

Depending on the enabling legislation that is in place, there are a few different options for structuring a land bank. Land banks can be governmental entities, quasi-governmental public corporations, or private non-profit corporations. A land bank can share staff with redevelopment authorities or housing departments, or be formed as an independent organization governed by a Board of Directors or Commission. Participation from public representatives, city staff, residents, and other interested stakeholders may include representation on the Board or advisory council. The governance characteristics, advantages, and disadvantages of different structures of land banks are presented in the table below:

Disadvantage: The mission of redevelopment authority or housing department (housing or commercial development) may take precedence over other goals of land banking (e.g., disposition of vacant properties), and staff capacity may be stretched thin for land bank functions.

Disadvantage: There may be accountability concerns since public meetings and records disclosure required for governmental entities do not apply to private corporations. As with an independent public corporation, there may be misalignment between the land bank and municipality strategies.

This could include, for example, an overconcentration of low-value properties in certain neighborhoods, high vacancy rates, a burdensome tax-delinquent property disposition process, or lack of affordable housing or green spaces. Local governments can share data with the land bank via a vacant property inventory or other means to better identify community needs.

In the early stages while the land bank is ramping up its programming, local governments may need to cover the operating costs of the land bank through annual budget appropriations, housing trust funds, bonds or loans, or in-kind support like shared staffing. Land banks can use HOME and CDBG funding for certain activities if there is a plan in place for the property which includes a CDBG/HOME eligible end use (e.g. demolition and rehabilitation in target neighborhoods) within the time frame permitted by those programs. Local governments and land banks can also work together to secure philanthropic foundation grants and private sector donations from organizations interested in community development.

Another mechanism to secure funding for a land bank is to establish a delinquent tax revolving fund (DTRF). A DTRF can enable a local government authority such as a land bank to borrow funds to pay off delinquent property taxes owed to the local governments. In exchange, the land bank receives the right to enforce the tax liens, and receive the interest and penalties on such liens if paid back. A DTRF allows a land bank to either acquire properties by foreclosing on their tax liens or receive the revenue from interest and penalties to pay off the initial loan and fund other land bank operations.

The Fulton County/City of Atlanta Land Bank Authority (LBA) was authorized by state statute in 1990 and has been effective in returning land to productive use and getting properties back onto the tax rolls. The LBA is able to waive delinquent taxes, clear title issues on acquired properties, and facilitate the purchase of properties by community development corporations. The City of Atlanta commits a significant portion of its CDBG funds towards housing revitalization activities, including funding for the LBA. As of 2020, the LBA listed 170 properties in its inventory within the City of Atlanta.

The Little Rock Land Bank Commission (LBC) consists of 9 qualified individuals appointed by the Mayor, as established by City by-laws. The LBC established a number of policies related to property acquisition, disposition, land transfer, and land donation. Being a low-cost city with areas of vacancy, the Little Rock LBC focuses its resources on neighborhoods that show signs of decline (high vacancy, low owner-occupancy, high poverty rate) and offers parcels it acquires based on priority uses such as developing affordable housing, supporting homeownership, and establishing social service providers. As of October 2022, the LBC listed 54 properties on its inventory, the majority of which were vacant lots. 2351a5e196