Land Bank
Summary
Land Banks (LB) are usually public, quasi-public, or nonprofit entities established with statutory authority that acquire, hold (usually for a short amount of time), manage, dispose, and repurpose land that is often vacant, underutilized, abandoned, or foreclosed. Lands are removed from the speculative market for future community-oriented use, such as affordable housing or commercial and cultural spaces. LBs achieve this by consolidating surplus city properties, acquiring tax-delinquent vacant properties, holding property tax-exempt, extinguishing liens and clearing titles, and disposing of LB’s properties by transferring ownership to private entities (including those focusing on community ownership) for uses aligned with community goals.
LBs by themselves achieve more limited community ownership compared to other models we highlighted, as LBs tend to only hold properties in the short term before disposition. LBs’ disposition strategies determine the fate of the properties, balancing between profit, which is crucial to the sustainability of the LB, and community interests—acting as a steward in doing so. It is their disposition strategies that determine whether community ownership is incorporated and expanded.
Advantages
Enabling legislation with granted power: Most LBs are set up in the 17 States that have passed comprehensive state-enabling land bank legislation as of 2023. The legislation grants LBs powers such as 1) property tax exemption and power to extinguish back taxes, making following development less expensive by limiting the holding cost, 2) first right to purchase tax-delinquent properties before the auction for better cost-effectiveness, 3) dispossesses based on the best outcome, not the highest price by circumventing restrictive disposition procedures.
Example: In New York, more than 90% of the five thousand properties acquired by the state’s land banks since 2013 were acquired through the local tax foreclosure process before being auctioned.
Flexibility in strategies and beyond development use: LBs can have great flexibility in how they acquire, manage, and dispose of properties. LBs can even steward properties without acquisition, e.g., as a master leasee of municipal properties. The flexibility is imparted primarily through formal relationships with municipal government and the partnerships built with developers and beyond.
Example 1: Cuyahoga Land Bank leased a parcel from the City of Cleveland and subleased it to an urban community educational farm and, subsequently, a winery while providing community gardens and green space for the community. The planning for the land’s next use is underway, and calls for for-profit and municipal uses (e.g., police headquarters) were greatly outnumbered by voices to maintain the green space for community use at the ward meeting.
Example 2: Twin Cities Land Bank purchased properties on behalf of not only affordable housing developers but also housing co-ops formed by tenant unions and nonprofits. When the building that houses a local nonprofit went up for sale, the land bank bought the property and entered into an agreement with the nonprofit, giving them up to three years to come up with $500,000 to acquire the building back from the land bank.
Challenges & Critics
Pressure to “self-sustain” and limited funding could shift LB priorities: Market pressure could force LBs to shift resources to high-demand neighborhoods and deprioritize equitable development.
Disposition strategies could either strengthen or end community ownership and stewardship: Since LBs are designed to hold on to properties for only a short amount of time, how intentional LBs are in their disposition strategies will determine the fate of the properties.
Example: Detroit Land Bank Authority gave city employees a 50% discount on land bank properties, but a review of 70 homes sold under the discount program in 2015 shows that, four years later, nearly 40 percent of those are at risk of foreclosure, under significant deterioration, or have been sold to new owners including speculators.
Emerging Practices
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Separate governance from local government
LBs are most effective when day-to-day governance and decision-making regarding properties are separated from elected public officials.
💡 Example: New York’s Land Bank Act gives local governments the discretion in naming board appointees and permission to create community advisory boards.
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Value and showcase outcomes that advance justice and equity amid pressure to maximize revenue
LBs, especially those with limited funding or in the growing phase, need to uphold community interests creatively under financial pressures. Maintenance and interim stewardship of vacant properties, which directly correlate with neighborhood condition, reinvestment appeal, and quality of life for residents, are often at risk of being neglected when LB is focused on disposition.
💡 Example: Albany County Land Bank’s Inclusive Neighborhoods Program gives the local community land trust first rights to purchase homes in more stable neighborhoods at a discount and piloted the community maintenance and stewardship program with the land trust.
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Develop and foster close relationships with traditional partners and beyond
With a Rolodex full of trusted development and community partners, LBs dispose and transform properties more efficiently, reducing holding time and operation and maintenance costs.
💡 Example: Land Bank Twin Cities buys land on behalf of nonprofit developer partners like Project for Pride in Living, CommonBond, and Aeon and holds until the partners gather the funds to purchase from the land bank.
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Leverage the balance sheet to gain access to financing
LBs can be creative and access more capital by leveraging their assets. This is especially useful for LBs targeting commercial real estate, given the more limited public subsidies available for commercial projects than housing projects.
💡 Example: Land Bank Twin Cities leveraged its balance sheet of property inventory to access conventional bank loans to acquire commercial real estate worth $40 million and counting.