Land Banks & Community Land Trusts: Not Synonyms or Antonyms. Complements

By: Emily Thaden, Kim Graziani, Annie Stup

This blog post also appeared on the Shelterforce blog, rooflines.org.

Credit: Handshake by AK Rockefeller via flickr, CC BY-SA 2.0

“For land banks to get into the affordable housing business, which is a discipline in itself, there could be claims that it’s off mission. But it’s not always off mission, particularly when it comes to improving or emerging markets. It might be about tweaking the disposition strategy.”

—Gus Frangos, president and general counsel of the Cuyahoga Land Bank, explained during a session on land bank and community land trust partnerships at the Reclaiming Vacant Properties conference.

Land banks and community land trusts (CLTs) are often perceived as “off mission” or antithetical tools that are not suited for the same environments. Conversely, they also tend be conflated as one and the same. Neither perception, however, reflects reality. In this blog post, Center for Community Progress and Grounded Solutions Network come together to help set the record straight and explore how land banks and community land trusts can coordinate to optimize equitable development outcomes. But first, let’s clarify each tool and dispel prevalent myths.

What is a land bank?
Land banks are public entities, usually public nonprofit or governmental entities, which specialize in the conversion of vacant, abandoned and foreclosed properties into productive use. Typically, land banks are granted special powers via state enabling legislation. These powers include the ability to remove legal and financial barriers, such as delinquent property taxes, that often render vacant and abandoned properties inaccessible or unattractive to the private market. Land banks acquire properties through different means, but the most common pipeline is the property tax foreclosure system.

While the first land banks were established approximately 40 years ago, the vast majority of land banks have come into existence since 2008. Currently, there are approximately 150 land banks in 20 states. One of the greatest features of the modern-day land bank is its versatility. Land banks’ strategies for their properties can be tailored to a community’s needs, and driven by land-use goals and community priorities. A common goal, however, is to serve as an important tool to more efficiently, effectively, and equitably address the negative impacts of vacancy and abandonment, in coordination with other partners and strategies.

While land banks most commonly operate in weak to extremely constrained housing markets, the ability to efficiently access tax-delinquent properties, with a goal to achieve more community-driven, predictable development outcomes, gives a land bank the flexibility to intervene wherever vacancy or blight might hinder or harm the health and vitality of a neighborhood.

What is a community land trust?
CLTs are traditionally private nonprofits that hold land in trust to provide affordable housing and other community assets in perpetuity. The “classic” CLT has a corporate community membership and a balanced board structure composed of lessees, dues-paying community members, and public representatives. Established in the late ‘60s, CLTs are an effective tool to gain community control of land in order to address community needs. To date, there are roughly 225 CLTs in 46 states.

In some places, CLTs have developed and maintained ownership of agricultural sites or commercial spaces for needed community services; in others, CLTs have created affordable residential properties. What sets CLTs apart from other nonprofits conducting or supporting mindful development, however, is their steadfast commitment to ensuring that the land held in trust remains a lasting community asset and that any homes on the land held in trust remain affordable permanently through lasting affordability controls and shared equity homeownership models. Despite “hot” or “cold” changes in the surrounding market, therefore, homes in the land trust are forever a stock of affordable housing, which continue to help family after family with modest incomes. Given a one-time public investment can create affordable homes in the trust for all current and subsequent households, CLTs are also applauded for their efficient use of public funds.

Myth 1: Aren’t land banks and CLTs basically the same thing?
No. Land banks and CLTs are different entities with different purposes and powers. This misconception likely arises from the similarity in name and perceived purpose: both involve conferring ownership of land to a special, dedicated entity in order to improve land use and community outcomes. While both entities acquire and hold land, they do so for varying periods of time and different purposes, acting at different times in the development process. Therefore, they are best conceptualized as complements or supplements to each other.

A land bank will typically intervene in order to resolve back taxes or title issues that otherwise keep a distressed property stuck in decline. By utilizing its special powers, typically granted through state-enabling legislation, a land bank can effectively access distressed properties and efficiently clear title to achieve marketability. By banking land on behalf of the public and devising strategies and priorities for their disposition, land banks are able to unclog bureaucratic or legal pipelines to result in more predictable outcomes, consistent with community goals. Hence, most land banks hold and maintain land temporarily until a responsible owner is appropriately identified.

A CLT, on the other hand, typically enters later in the process, seeking to become a permanent, responsible owner. CLTs are not interested in the tedious and time-consuming acts of clearing titles or managing blighted properties and vacant land if they can help it. Just like other nonprofit developers, CLTs must be as efficient as possible with new construction or rehabilitation in order to make good use of public funds, keep properties affordable, and mitigate their risks. Hence, CLTs typically enter into the development process after titles to developable land are marketable and insurable. Ultimately, CLTs are often interested in being the recipient of donated land from a local government because it decreases their costs for creating lasting community assets.

Myth 2: Aren’t CLTs and land banks relevant in different types of communities?
No, they are not—and arguably, they should often be used in the same type of community. It is a common misconception that CLTs and land banks operate exclusively at opposite ends of the housing market spectrum: land banks in cold markets where demand has dried up, and CLTs in hot markets where escalating property values threaten affordability. However, both entities can play roles in both types of markets. In strong markets, land banks can ensure that some vacant, abandoned, or tax-delinquent properties are directed toward end uses that meet critical community needs, such as affordable housing. In weak markets, CLTs can bring investment into distressed neighborhoods, helping with revitalization while also protecting affordability for when the market heats up (again).

As illustrated by some places where CLTs and land banks are co-located, many cities are home to “dual markets” that contain neighborhoods characterized by both stagnation and revitalization. For instance, some areas with high rates of vacancy and foreclosure are blocks away from those where rapid development has led to skyrocketing rents and property values. These dual markets highlight the reality of relatively common fluctuations: just as historically low-income neighborhoods may suddenly be hit by the next wave of gentrification, well-established communities—especially communities of color—can fall victim to foreclosure and vacancy due to changes in industries, transportation, or development patterns. While weak market cities need revitalization efforts, they must also keep long-term affordability in mind in order to prevent displacement, socioeconomic segregation, and unequal access to amenities when markets rebound.

Hence, land banks and CLTs may be used in complementary fashions to serve complementary purposes. For example, they can work together to promote equitable development that buffers the adverse impacts of the ebb and flow of private capital, by helping otherwise inaccessible land to be placed in trust for public benefit and to foster a stock of affordable housing that lasts.

How can CLT and land bank collaboration support equitable development?
Theoretically, a land bank-CLT “property pipeline” can achieve both lasting stabilization and affordability despite fluctuations in the market. As argued by John E. Davis in a 2012 Rooflines article, CLTs and land banks are each the potential solution to the other’s problem: CLTs face difficulty acquiring quality properties while land banks have trouble disposing of properties to responsible owners. While there are currently few land bank and CLT collaborations across the U.S., the good news is that we see a lot potential for effective partnerships. One current opportunity is through Center for Community Progress’ Technical Assistance Scholarship Program, which identifies land bank and CLT collaborations as an eligible project. (Applications are due November 17, 2016).

Annie Stup—a co-author of this post—interviewed 16 practitioners in co-located land banks and CLTs and learned that very few land banks and CLTs are optimizing their collaborations or collaborating at all. She identified the following challenges for these collaborations and recommendations for how to address them:

1. Understand & Value Both Tools. Land bank and CLT staff alike may not fully grasp the rationale for the goals of the other party. For instance, Stup found that lank bank staff tended to doubt the utility of CLTs in weak markets or why affordability should be preserved in disinvested neighborhoods. Meanwhile, CLT staff tended to not fully grasp the magnitude of vacant and blighted properties with which the land banks had to contend or understand why affordable housing may be deprioritized when there was a surplus of low-cost housing. Explicitly discussing the relevant applications and limitations of both tools would benefit practitioners to shape and support collaborations.

As a result, a land bank could modify its disposition policy, such as establishing permanent affordable housing as a priority or prioritizing the transfer of properties to a CLT through a negotiated sale. Meanwhile, CLTs may better align their development strategies and projects to the properties and goals of the land bank.

2. Acknowledge Different Objectives & Focus on Overlapping Priorities. Land banks have been understandably focused on addressing large inventories of vacant, abandoned, and tax-delinquent properties, which usually relegates land banks to weaker housing markets and disinvested neighborhoods. CLTs, with a primary focus on preserving affordability, are typically found in moderate or hot housing markets. But as mentioned above, while the primary objectives may differ, there is clear overlap of priorities and opportunities to advance mutual goals.

Land banks and CLTs are encouraged to regularly convene to review and analyze tax-delinquent properties scheduled for auction, the primary acquisition pipeline for most land banks. A land bank could exercise its special powers to acquire, hold and clear the title of tax-delinquent properties that are of strategic relevance to a CLT. Hence, each party must acknowledge the objectives and priorities of the other and proactively identify opportunities that may result in shared wins.

3. Tend to the Constraints of Both Parties. Undoubtedly, land banks and CLTs both tend to lack adequate capacity or resources. Due to resource limitations, land banks may have to work more with for-profit or nonprofit developers rather than hold properties for use by a CLT.  Meanwhile, CLTs may be limited in their ability to cobble together the resources for acquisition, rehabilitation, and subsidization of land banked properties in order to convert them to quality, affordable properties for community use in an effective time frame.

If land banks and CLTs collaborate, they have the potential to more efficiently leverage the existing resources and strengths of each—and magnetize new funding—to overcome these barriers.