Land Banks Help Restore Abandoned Neighborhoods

Michigan Leads the Way with 36

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Sara Toering is general counsel for the Center for Community Progress and co-author of the Georgia Land Bank Resource Manual.

Katelyn E. Wright is executive director of the Greater Syracuse Land Bank in Syracuse, N.Y.

Chris Norman is executive director of the Fulton County/City of Atlanta Land Bank Authority.

Posted: Wednesday, May 28, 2014 3:30 pm

There are about 14 million housing units vacant year-round in the United States.

Many of them are abandoned and tax delinquent, creating a blight of despair and ugliness throughout industrial cities in the Northeast, the Rust Belt and metropolitan areas everywhere.

Land banks – governmental entities that specialize in converting vacant, abandoned and foreclosed properties for productive use – are a promising, and sometimes under-utilized tool for urban planning and community development, according to Frank S. Alexander, co-founder of the Center for Community Progress, which has worked to implement land banks in many areas of the country.

The loss of population in major cities since the 1950s and the more recent mortgage crisis, forcing millions from their homes, continues to decimate communities. Cleveland’s population, for example, fell from more than 900,000 in 1950 to fewer than 400,000 in 2010. Today, Detroit has nearly 80,000 vacant homes. In Las Vegas, there are 40,481 vacant single-family homes, 16,542 empty condominiums and 5,137 vacant townhouses, according to the University of Las Vegas.

The negative impacts of vacant residential, commercial and industrial properties are well known, and it is challenging to rebuild these abandoned communities and neighborhoods.

Founded in 2010, the Center for Community Progress is the country’s preeminent organization addressing issues of vacant properties, both the prevention of abandonment and adaptive reuse. Its staff in Washington, New Orleans and Flint, Mich., provides advocacy, technical assistance and organizational development services to governments and activists throughout the U.S., “helping neighborhoods, cities, counties and states forge and implement effective strategies to prevent and reuse vacant properties.”

Alexander is the Sam Nunn Professor of Law at Emory University, Atlanta. He has authored eight books and more than 40 articles, including the 2011 publication, “Land Banks and Land Banking” and the Georgia Land Bank Resource Manual.

According to Alexander, there are about 150 land banks in 23 states, including Michigan which leads with 36. The center has helped more than 100 communities in 22 states during the last four years and recognizes three generations of land banks. Each succeeding generation has expanded its legal, acquisition and disposition powers.

Center General Counsel Sara Toering, co-author of the Georgia Land Bank Resource Manual, said the land banking concept first emerged in the 1960s as a new urban planning tool to deal with urban sprawl and the early decline and abandonment of inner-city neighborhoods.

First generation banks included St. Louis (1971), Cleveland (1976), Louisville (1989) and Atlanta (1991). While this first group of agencies began to attack the problem of vacant properties, Toering said they did not have a lot of clout and acquired properties passively, mostly those that failed to sell at sheriffs’ sales.

Toering said in the early 2000s, states began to revise land bank and tax laws, which led to the second generation of land banks, including the Genesee County Land Bank in Michigan and the Cuyahoga County (Ohio) Land Reutilization Corp., or CLB, which has done much to eliminate vacant properties in greater Cleveland through demolition and rehabilitation.

“Michigan and Ohio amended multiple parts of state law and also changed tax foreclosure law,” Toering said.

The 2003 Michigan Land Bank Fast Track Act created self-funding mechanisms for land banks, allowed them to acquire all tax-foreclosed properties and empowered Michigan land banks to demolish and rehabilitate properties through code enforcement.

Before passing the act, the state legislature streamlined the Michigan tax foreclosure process, shortening it from seven to only two years.

Toering said the third generation of land banks arose out of the recent foreclosure crisis and are supported by state statutes to give maximum power to local governments to repurpose vacant properties.

“It’s a laser focus on the problem,” she said. “Land bank statutes are now much easier to read and understand. All-important self-financing mechanisms are built in. For example, when a property transfers back to public, productive use, 50 percent of new taxes revert back to the land bank for five years.”

Perhaps the most important advantage is that a local government can tailor a land bank to fit community needs.

“The land bank in Valdosta, Ga., is tremendously successful with its partnership with Habitat for Humanity to turn as many as 100 properties a year into single-family homes,” Toering added. “The Cuyahoga County bank has a multi-million dollar annual budget, operating on a much larger scale with great success.”

The Fulton County/City of Atlanta Land Bank Authority (LBA) began to focus on ‘conduit transfers’ of tax-delinquent properties to community development corporations (CDCs) at the rate of about 50-100 properties a year, she added. It later created the first-ever five-year holding period in 2009 to rescue properties during the foreclosure crisis, enrolling more than 200 properties and releasing 34. In 2011, LBA teamed up with other land banks in the state to establish the Georgia Association of Land Bank Authorities (GALBA), which gave the land banks a formal voice in state politics.

“The primary thrust of all land banks and land banking initiatives is to acquire and maintain properties that have been rejected by the open market and left as growing liabilities for neighborhoods and communities,” Alexander wrote. “The first task is the acquisition of title to such properties; the second task is the elimination of the liabilities; the third task is the transfer of the properties to new owners in a manner most supportive of local needs and priorities.”

According to the HUD website, land banks also can clear titles, extinguish property taxes on abandoned structures or acquire and hold properties for future public use. This enables them to be flexible and effective tools for bringing abandoned properties back into active use, contributing to local property tax coffers, advancing communal goals for more green space, and increasing the local supply of affordable homes.

At the same time, the land banks’ efforts reduce blight, enhance public safety, stabilize communities and rehabilitate properties that the real estate market cannot process efficiently. In these ways, land banks combat both the direct and indirect costs of vacant properties.

The Greater Syracuse Land Bank (GSLB) is a new third generation land bank, one of eight founded after New York passed enabling legislation. GSLB incorporated in 2012 and acquired its first properties in October 2013.

The city had tried targeted investment (CDBGs), tougher code enforcement and other methods to deal with 1,800 vacant structures and 3,000 vacant lots concentrated in certain neighborhoods, Executive Director Katelyn E. Wright said, but “nothing could approach the scale of our problems. Now, our land bank seems like it will work well for both the city and Onondaga County.”

The bank already acquired 280 properties and disposed of a dozen, Wright said, and it is working on getting three dozen more.

“The bank is a bridge between the private and public sectors. We are able to sell to well-vetted buyers. We ask for detailed development plans, itemized budgets, how it will be managed and proof of financing,” she said. “For example, if a developer says he or she can do the labor, we ask for proof that they have done it before.”

A lot of the value in a land bank is invisible, so GSLB must do enough tangible things to show its value, Wright said, including working closely with elected officials and neighborhood associations.

But adequate funding is a major challenge for land banks.

“The primary way we acquire properties is through tax delinquency,” Wright said. “We can build a lot of inventory at low cost. It’s difficult to acquire through other methods,” she said. “Donation is another option for us.”

The GSLB also hopes to change the market.

“Maybe we can generate market demand if we fix enough properties. Many of our neighborhoods have been neglected for years. In some, the vacancy rate is 20 percent. GSLB only controls a small percentage of properties in each neighborhood. We are combating absentee landlords who are buying and flipping without our control. Hopefully, the sales we make will turn a weak real estate market stronger,” Wright said, adding that a house in Syracuse can currently be purchased for as little as $10,000.

The object is to get the properties, stabilize them and flip them for the best outcome.

“For the first 50 days a property is on the market, we only look for buyers who will occupy it. We want responsible private investors who we will help to find funding if possible. We prefer to sell a block of properties as one,” Wright said.

GSLB also uses enforcement mortgages equal to the value of the property and the amount a buyer plans to invest. If work is not done according to plan, GSLB can take back the property.

Chris Norman is in his fourth year as executive director of the Fulton County/City of Atlanta Land Bank Authority, or LBA, a “vital cog in the wheel” of Georgia, especially during the meltdown from 2008-2010.

“We took on a lot of water; a lot of people were stressed out; there were a lot of foreclosures here,” Norman said, adding that Georgia was among the top five states in terms of the severity of the foreclosure crisis. LBA distributed funds made available by the Neighborhood Stabilization Program (NSP) and bought and held properties through the Land Bank Depository Agreement Program, launched in 2009.

One of the more significant achievements of this program was the acquisition and demolition of a 28-unit foreclosed apartment building. Ownership was transferred to National Church Residences, which redeveloped the property as Betmar Village, a 42-unit senior living facility in Atlanta’s Lakewood neighborhood.

LBA is poised to expand its scope of activities even more, Norman said, largely because of the self-funding option authorized recently by the Georgia legislature.

“I am incredibly excited about land banks, a targeted and strategic investment of resources,” Toering said. “There is a lot of networking now. Folks in the trenches have been doing work for decades and are sharing best practices. That means less reinventing of the wheel and more innovation.

“The increasingly regional approach is exciting, too,” she added. “Local governments are combining forces to address the symptoms of blight on a broader scale, which is essential.”

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