A History of Ohio Land Banking 2009–2021: From Legislation to Operation

This is an excerpt of Chapter 7 of Tackling Vacancy and Abandonment: Strategies and Impacts After the Great Recession, jointly produced by the Center for Community Progress, the Federal Reserve Bank of Atlanta, and the Federal Reserve Bank of Cleveland. It has been lightly edited and condensed for the web. In this chapter, Gus Frangos, President of the Cuyahoga Land Bank, discusses the history of land banking in Ohio. Click here to download the full chapter and read more insights on tackling vacancy and abandonment from the nation’s leading experts.

At the height of the foreclosure crisis post-2008, a group of elected officials, community development practitioners, and lawyers came together to craft a strategy to respond to the hemorrhaging real estate market in Ohio. While the crisis was a nationwide catastrophe, neighborhoods in Cuyahoga County were widely considered the epicenter of the national foreclosure crisis. Once-thriving middle-class neighborhoods with much history, shops, solid housing stock, and cultural treasures transitioned almost overnight into vacant and abandoned streets and retail strips.

The disproportionate impact in Ohio paved the way for Ohio’s General Assembly to pass a comprehensive county land bank statute in 2009. However, to fully understand how this legislation came to pass, and why it is helpful contextually to review the history of land banking and tax foreclosure in Ohio.

Ohio’s Traditional Land Bank Law

In the 1970s, Ohio had passed what can be viewed as traditional land bank legislation, which authorized municipalities, counties, and townships to create land banks.

Though not a government entity or body politic, the original Ohio land bank laws were designed to: 1) allow municipal land banks to acquire properties through tax foreclosure at no cost after being exposed to sale without bidders and 2) to hold these properties real estate tax exempt until the land could be repurposed.

In large urban areas with declining populations, making these properties productive in weak markets is challenging. As a result, many of these lots remain in municipal land banks for years. The government land banks’ ability to transact these properties is more regulated and less flexible when it comes to property disposition compared to private-entity transactions.

These land banks are less inclined to hold vacant and abandoned structures because of the potential for open-ended liability exposure, maintenance requirements, and costs that cities often cannot afford, especially when the property volume is great. Municipalities typically will take these properties only when there is an identified end user.

Ohio Tax Foreclosure Reform: Precursor to Ohio’s County Land Banks

Before Ohio’s new county land banks were conceived, the main goal from 2004 to 2006 was to respond to local leaders’ demand for speedier tax foreclosure of long tax-delinquent vacant and abandoned lands.

At the time, a tax foreclosure case took two to four years to adjudicate. During these long tax-foreclosure proceedings, properties that could be renovated would further deteriorate, catch fire, be vandalized, or be traded to speculators or flippers, making the property no longer suitable for rehabilitation.

Up to this point, in Ohio, tax foreclosure occurred exclusively in the judiciary sector. Civil tax foreclosures filed in the common pleas courts are procedurally subject to all the Ohio Rules of Civil Procedure just as is any other civil case. However, because a tax foreclosure is statutory in nature, the Ohio Civil Rules of Procedure posed a structural impediment to expeditious tax foreclosure of vacant and abandoned properties.

Community development strategists thought expediting tax foreclosures would go a long way toward getting toxic titles cleansed and back into tax-producing status. They crafted HB 294, which expedited administrative tax foreclosures specifically for vacant and abandoned properties.

In 2006, the Ohio General Assembly passed this legislation. HB 294 authorized tax foreclosures to occur administratively in county boards of revision—preexisting boards that hear real estate tax valuation appeals. Except for due process requirements, which require notice and opportunity to be heard, the civil rules do not apply to board of revision proceedings.

Once passed, tax foreclosures could be adjudicated through the new administrative forum in as little as four months after service of process was perfected on the delinquent owner and lien holders of record. These properties were in most cases sold at sheriff’s sales to responsible rehabbers or to municipal land banks, kept and managed the unsold vacant lots until a future use could be identified. Everything seemed to work as planned—until 2008.

From 2000 to 2001, the number of mortgage foreclosures in Cuyahoga County went from 5,900 to almost 7,000. This number rose to 8,700 in 2003, 9,700 in 2004, 13,943 in 2006, and 14,946 in 2007. The trend continued for the next several years.

Although the rate of foreclosure in Cuyahoga County had declined as of 2020, much remedial work remains unfinished. Up to January 2020, the Cuyahoga Land Bank was still receiving approximately 100 vacant and abandoned parcels per month into its inventory through the HB 294 tax foreclosure law.

Next-Generation Ohio Land Banks

When the foreclosure crisis led to the collapse of the real estate market, vacant and abandoned properties were being foreclosed through the new administrative tax foreclosure process like a fire hose. A responsible repository to receive these properties, triage them, provide a modicum of maintenance, and ultimately dispose or demolish them was needed. This proved a tall task, particularly because such a new entity would require statewide legislation. Three main concepts were needed to make land banking efforts meaningful:

• Identifying the responsible repository
• Gaining access to the properties
• Identifying the funds to initiate programs, retain professional staff, and ultimately dispose of these properties

The Cuyahoga Land Bank has offered many lessons.

One early lesson for new land banks is to balance enthusiasm with attention to process. The establishment of a land bank in a community typically generates anticipation and excitement. But because county land banks are typically quasigovernmental—or, in the case of the Cuyahoga Land Bank, nonprofit entities but governed by public officials or public-purposed—there is intense scrutiny at many levels.

It is important to start slowly and to address simple things like property insurance upon acquisition, payroll systems, accounting, employee manuals, ethics policies, and the processes of receiving, holding, maintaining, and disposing properties. In the early stages, if a new land bank stumbles in these areas, it risks being branded as unprofessional. The Cuyahoga Land Bank opened its doors in June 2009 but didn’t transact a property until November of that year, so that each anticipated property pipeline was tested and debugged.

Another lesson learned was to develop mutually productive and supportive relationships with elected officials and policymakers, especially those who intersect with the land bank. It is easy to assume that everyone knows about land banking, but policymakers and elected officials focus on many issues. The Cuyahoga Land Bank nearly was stopped before it got started because a recently elected county executive was unfamiliar with the Cuyahoga Land Bank and assumed it was one of the many routine county government boards and commissions of which he was the sole appointing authority. It is essential to stay connected to officials and provide routine reorientations and briefings.

Last but not least, a healthy attention should be given to equitable contracting and vendor relationships from the inception of operations. If this focus is built into the DNA of the organization early, it will become part of the culture and produce equitable results.