Land banks are public entities with unique governmental powers, created pursuant to state-enabling legislation, that are solely focused on converting problem properties into productive use according to local community goals.

Vacant, abandoned, and tax-delinquent properties are often grouped together as “problem properties” because they destabilize neighborhoods, create fire and safety hazards, drive down property values, and drain local tax dollars. In some sense, these are properties the private market has altogether rejected.

Land banks acquire these properties with the intention of either immediately returning these properties to productive use, or temporarily holding and maintaining them for the purpose of stabilizing distressed markets or fulfilling long-term land use goals.

Land banks, in essence, are a direct response to the growing trend of vacancy and abandonment, created to strategically acquire problem properties and convert these liabilities into assets. In short, land banks are intended to acquire title to these problem properties, eliminate the liabilities, and transfer the properties to new, responsible owners in a transparent manner that results in outcomes consistent with community-based plans.

Most land banks have special powers (see below) that enable them to undertake these activities far more effectively and efficiently than other public or nonprofit entities. When thoughtfully executed, land banks can resolve some of the toughest barriers to returning land to productive use, helping to unlock the value of problem properties and converting them into assets for community revitalization.

Land banks are designed to acquire and maintain problem properties and then transfer them back to responsible ownership and productive use in accordance with local land use goals and priorities, creating a more efficient and effective system to eliminate blight.

In order to accomplish these tasks, land banks are granted special powers and legal authority pursuant to state-enabling statutes. Though these statutes differ widely from state to state, the more recent examples of comprehensive land bank legislation generally grant to land banks power to:

• acquire property through various mechanisms, including obtaining property at low or no cost through the tax foreclosure process,
• hold title to property tax exempt and in some cases extinguish back taxes,
• clear title and in some cases expedite the clear title process,
• consolidate and assemble publicly held inventory into a single agency/department,
• streamline disposition and sale of properties to responsible owners or developers,
• lease properties for temporary uses, and
• convey property for below market value, focusing on outcome that best aligns with future land use goals, rather than the highest bid price.

We want to stress that a land bank is not a “silver bullet” for communities struggling with vacant, abandoned, and deteriorated properties. Though land banks are uniquely designed to help reduce these problem properties, the policies, priorities, and activities of a land bank must complement other community strategies and activities, such as strategic code enforcement, smart planning and community development, and effective tax collection and enforcement. For more information on the systems needed to effectively address vacant, abandoned, and deteriorated properties, see Equitable Revitalization.

Any community considering the creation of a land bank should assess a number of factors to determine if it is needed or likely to be successful. Some common triggers for creating a land bank include:

• Large inventories of vacant and abandoned property
• Properties with depressed market value
• Properties with title problems
• Tax sale proceedings that perpetuate disinvestment in a neighborhood
• A market that is dominated by investors that make bulk purchases with the intent of holding until the market improves
• Restrictive public property sale processes

In the right circumstances, a land bank can help return vacant and problem properties to productive use. However, it is important to remember that it addresses some of the challenges and, as such, is simply one element of a comprehensive set of strategies. A land bank is not a silver bullet. The policies, priorities, and activities of a land bank must connect with other efforts in the city, including planning, delinquent property tax enforcement, strategic code enforcement, and reuse.

While all land banks exist to serve the same primary purpose of acquiring vacant and problem properties and returning them to productive use, they are quite diverse in their structure and operations. There are approximately 250 land banks and land banking programs around the country, and they vary greatly in the type of city/region and economy they operate in, size of their inventory, capacity, legal authority, goals, and programs. Despite this diversity, there are some common traits in the land banks that are the most successful. Effective land banks:

• Adopt a streamlined tax collection and foreclosure process that gives land banks special powers to ensure that properties end up in responsible ownership. Land banks can play an instrumental role in ensuring that tax delinquent properties are conveyed to responsible owners that return the property to its highest and best use. This role is most effective in jurisdictions where governmental entities have a right to remove properties from the tax sale that are vulnerable to predatory investors. These special powers may include the ability to 1) bundle multiple tax sale properties and attach conditions to the sale or 2) the right to take title to tax delinquent properties before they are made available publicly. Additionally, tax sales processes that wipe all existing non-federal liens and streamline land bank acquisition assist in getting properties back to productive use quickly.

• Adopt a comprehensive long-term land use strategy in which land banks supports reuse goals. Land banking in itself is not a long-term land use strategy. A land bank should have a clear disposition strategy that aims to return parcels to productive use, including those uses that benefit a wider public objective. A land bank’s disposition strategies must directly help achieve local land use goals and be aligned with planning and economic development strategies. These land use goals should inform a land bank’s policy on what it acquires and how it disposes of property including cost of transfer. To make this possible, land banks are often authorized to transfer ownership for a range of compensation and to weight the highest and best use of the property more heavily than the highest cash bid.

• Prioritize transparency and accountability It is a key goal of a land bank to improve transparency in order to properly steward public property. Transparency helps ensure residents are clear on priorities and values and have the opportunity to shape decisions regarding the highest and best uses of properties in their community. This is done by ensuring that all policies, transactions, and actions taken by a land bank are publicly available (ideally on the land bank’s website) and are supported by data.

• Adopt policies that engage residents and community stakeholders in the ownership, rehab, management, and development of vacant and abandoned properties. Whether or not vacant and abandoned properties are acquired and reused in support of local land use goals has a direct impact on the wellbeing of community members. Land banks that position residents and community stakeholders as strategic partners, or even as the developers or new owners, of formerly vacant and abandoned properties are the most effective at transferring property to productive uses that respect and meet residents’ priorities and needs. It is important to note that programs should build the capacity of the community sector and transfer properties at a pace which is appropriate given the community’s capacity.

• Align land banks with other tools and programs. Although land banks can be an effective tool to support locally developed goals its impact will be limited unless aligned with other tools and programs intended to reduce the inventory of abandoned and vacant properties and rebuild markets. Land banks should, for example, align with tax collection, code enforcement, and redevelopment efforts. A land bank is not a panacea for all problems, or even a necessary entity in many cities, but in the right environment and with the right legal structure it can be a key tool for finally returning vacant and problem property to productive use.

• Intervene in a failed market to support it, not replace it. Land banks are most effective when they intervene in the market to build its capacity, not to serve as a substitute. Distressed land value markets are also often plagued by a lack of financial and property services such as lending, realtors, and underwriters willing to insure homes in areas of high vacancy. In their efforts to bring properties back to productive use, land banks should engage financial and property services to expand lending, provide affordable home insurance, and increase traditional sales through realtors or brokers, which are advertised and recorded on multiple listing services. This often requires public, private, and philanthropic partnerships that collaborate and develop specialized products that meet the needs of a recovering real estate market. By engaging and building the capacity of the private sector, land banks have the potential to re-establish once-shaky markets and direct resources and subsidy to areas where it is most needed.

Depending on state and local law, land banks often have unique legal powers to support their activities and facilitate the return of problem properties to productive use. Though these statutes differ widely from state to state, they generally grant the power to:

• acquire property through various mechanisms, including obtaining property at low or no cost through the tax foreclosure process,
• hold title to property tax exempt and in some cases extinguish back taxes,
• clear title and in some cases expedite the clear title process,
• consolidate and assemble publicly held inventory into a single agency/department,
• streamline disposition and sale of properties to responsible owners or developers,
• lease properties for temporary uses, and
• convey property for below market value, focusing on outcome that best aligns with future land use goals, rather than the highest bid price.

Using these special powers, land banks can streamline blight removal and create a nimble, accountable, and community-driven approach to returning problem properties to productive use.

Land banks are generally funded through a variety of sources, which may include revenue from the sale of properties, foundation grants, general fund appropriations from local and county governments, and federal and state grants.

A couple of financing mechanisms unique to land banks have been included in state-enabling legislation. For instance, in Michigan and New York, land banks are able to recapture 50% of the taxes on properties returned to the tax rolls for five years. In Ohio, special fees imposed on delinquent taxpayers provide a dedicated source of funding for land bank operations. Finding consistent and preferably dedicated funding sources is critical to the success of land banks, as they incur significant costs converting unsafe liabilities the private market has rejected into assets that improve neighborhood vitality. Several of the more successful land banks from around the country are also capitalized by their local units of government either through yearly budget allocations or in-kind assistance such as shared staffing.

Most land bank acquisitions are vacant, residential, tax-delinquent properties. In addition to tax foreclosed parcels, land banks can acquire Real Estate Owned (REO) properties and receive private donations and public land transfers. Although most properties are typically vacant residential single-family homes or vacant lots, land banks also acquire multifamily dwellings, commercial and industrial properties, and in rare cases, occupied rental properties. In fact, some land banks even have well-developed brownfields programs through which they acquire large scale, formerly industrial properties.

Land banks and CLTs are different yet complimentary in nature. Community land trusts are nonprofit organizations, governed by CLT residents and nonprofit and public representatives, that provide permanent community control of land and affordable housing. A few key distinguishing features between land banks and CLTs are:

• Structure: Land banks are public entities with limited governmental powers conferred to them by state-enabling legislation, whereas CLTs are private nonprofits.
• Tenure of Ownership: While land banks can hold properties long term, they generally only hold properties for a short time, whereas CLTs perpetually own land.
• Property Disposition: Land banks can sell properties for a flexible price to a wide range of end users, consistent with community goals, whereas CLTs can only sell properties to income-qualified buyer.

Land banks and CLTs can leverage their unique features to work in concert and unlock a pipeline of quality affordable housing for current and future generations.

To learn more about the differences between land banks and land trusts and how these two entities can partner, click here > (link to come).

To find out if you have a land bank and CLT in your community, click here >