Land Bank

A land bank is a special-purpose governmental entity that focuses on the acquisition and management of vacant, abandoned, and foreclosed properties and the return of such properties to productive use. During the last third of the 20th century, many communities in the United States began to experience chronic and sustained economic decline and population loss, resulting in a slow but steady increase in the inventory of property functionally abandoned by the owners.

Vacant and abandoned properties impose significant costs on the surrounding neighborhoods and community. They no longer yield property tax revenues, they cause a decline in the valuation of adjoining properties, they result in increased police and fire protection costs, and they destabilize neighborhood communities. The common determinant of all land bank programs is the conversion of these properties from being pure liabilities into being assets for the community.

The history of land banking in the United States is relatively brief. The first generation of land banks emerged in St. Louis, Missouri, in 1971; Cleveland, Ohio, in 1976; Louisville, Kentucky, in 1978; and Atlanta, Georgia, in 1991. These initial land banks shared a common characteristic: Each land bank focused on receiving legal ownership of properties not sold at public auctions through proceedings to enforce payment of delinquent property taxes. The underlying problem was and is the prevalence of property tax foreclosure laws grounded in 19th-century procedures. These procedures commonly require 3 to 6 years to complete a tax foreclosure proceeding, create incentives for owners to simply abandon property, and fail to convey marketable and insurable title to prospective purchasers. Older industrial cities as well as cities with growing economies face the buildup of an increasing number of properties caught in the tax foreclosure process; these buildings are either inaccessible to the open market or faced with the absence of any market whatsoever. The second generation of land banks and land banking is characterized by legislative reform in Michigan (1999, 2003) and in Ohio (2009, 2010). In both instances, state statutes were passed that permit the creation of local land banks and reform property tax procedures to provide for the efficient and effective acquisition of abandoned tax-delinquent properties. The emergence of a third generation of land banks and land banking in the United States can be traced to the great economic recession and mortgage crisis of the last half of the first decade of the 21st century. In national legislation enacted in 2008, the federal government recognized for the first time the important role of land banking and provided $4 billion in funding for states and local governments to acquire, manage, and reconvey the excessive supply of foreclosed properties.

Land banking is the process or policy by which local governments acquire surplus properties and convert them to productive use or hold them for long-term strategic public purposes. Land banks are public authorities that specialize in land banking activities. Land banking can be undertaken by other public agencies, and not all communities need to create a separate land bank. In some communities, [Page 414]redevelopment authorities can and should serve a modified land banking function, and in others a land banking function could be managed by a housing and community development department. Land banks are created as a result of state enabling statutes, granting authority to local governments to create them as special-purpose entities or public authorities. They are usually created as a collaboration of two or more local government entities, most commonly a county and a municipality located within that county. They are governed by a publicly appointed board of directors and normally subject to all public meeting and public records requirements applicable to all governmental entities.

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