Land Banks Restore Neighborhoods...Building by Building, Lot by Lot

The concept of land banking began in the 1960s as communities sought solutions to urban disinvestment. The idea is simple ... to create a governmental entity that focuses solely on the conversion of vacant, abandoned and tax-delinquent properties into productive use. Land bank authorities achieve this goal by acquiring and overseeing redevelopment of these properties.

The organization of a land bank requires the cooperation of all state, county and local taxing entities that have liens on these properties. Negotiating agreements and developing priorities and guidelines takes some time.

The first land bank authority did not come to fruition until 1971 and emerged in the form of the St. Louis Land Reutilization Authority. During the last 30 years, additional land banking authorities have been created, each slightly different in structure, but all focused on the common goal of revitalization through the conversion of unproductive properties.

The two major authorities located in the Federal Reserve's Eighth District are the St. Louis Land Reutilization Authority and Louisville and Jefferson County Land Bank Inc.

A Solution to Urban and Rural Blight

Although first conceptualized as a solution to urban blight, land bank authorities have come to be used as a tool by older communities in both urban and rural areas. Regardless of their size, older communities face similar problems when dealing with issues surrounding abandoned properties. These properties depress tax revenues, strain public services and require public intervention for upkeep. Neighborhoods with significant numbers of these properties experience increased crime, and the structures often become targets of arson. Ironically, a community with a large number of tax-delinquent properties might be forced to cut city services for lack of funds-services such as fire and police, which are needed to combat the crime and arson in these structures.

When looking at ways to expedite the conversion of abandoned properties into productive use, communities often try to speed up the tax foreclosure and sale process or strengthen code enforcement. The lag in time between delinquency and tax foreclosure can be a problem, but expediting this process only ensures the property is removed from one owner's hands and placed in another's. It does not ensure the property will be rehabilitated. Ramped up code enforcement requires financial resources that a community with a large inventory of these properties might lack.

Land bank authorities not only acquire and dispose of the land, but by design maintain and set guidelines for the use of the land. Following disposition, authorities track the land for a period of years to ensure the property is being maintained in accordance with the sales agreement. Land banks are neither a redevelopment agency nor a land assembly agency. Land banks do not try to acquire entire blocks in neighborhoods, but acquire those properties within neighborhoods that are causing blight.

Land banks acquire the majority of land through tax foreclosure. Other methods, such as gifting by heirs or tax-delinquent owners and financial institutions, are rare but do occur. Land bank authorities are created with the power to waive unpaid taxes on properties if they are acquired for redevelopment.

The majority of land banks give nonprofit development organizations first rights to acquired property. By using the legal tools a land bank provides, a community can ensure tax-foreclosed properties are sold or developed with the long-term interest of the community and surrounding property owners in mind. Land banks provide marketable title to properties previously impossible to develop because of complicated liens and confusing ownership history.

Louisville and Jefferson County Land Bank Inc.

Louisville and Jefferson County Land Bank Inc. was established in 1988. Since its inception, the land bank has acquired approximately 4,000 parcels of land, disposed of 3,000 parcels and holds another 500 in predevelopment review. These parcels are being marketed as side yard opportunities to individuals living in adjacent properties.

Melissa Barry, director of Louisville Metro Housing and Community Development, says that, prior to 1988, vacant properties in Louisville and Jefferson County were made up of city and county foreclosures. Taxing entities in the area included the city of Louisville, Jefferson County, Jefferson County Public Schools and the commonwealth of Kentucky. Even after tax foreclosure and the sale of the property at a state land commissioner sale, tax liens often remained, clouding the title. Through an inter-local government agreement, Louisville and Jefferson County Land Bank Inc. was established.

Maria Hampton, senior branch executive of the Louisville Branch of the Federal Reserve Bank of St. Louis, says she made use of the Louisville land bank on numerous occasions in her former capacity as president of The Housing Partnership Inc. in Louisville. The land bank allows nonprofit organizations to gain site control of land in disenfranchised neighborhoods, to redevelop housing for homeownership and to deliver homes at less than market rate, Hampton says. The availability of these lots also offers opportunities for large-scale, single-family development financed with tax credits, she says. Site control allows for easier bank financing and offers an opportunity for private investment to leverage the total development cost of a deal. In addition, creative use of land bank land offers opportunities for commercial development integral to the success of neighborhoods.

For more information on Louisville and Jefferson County Land Bank Inc., contact Barry at (502) 574-3107 or e-mail her at melissa.barry@loukymetro.org.

St. Louis Land Reutilization Authority

The city of St. Louis Land Reutilization Authority (LRA) was created in 1971 by state statute and was the first entity of its kind.

LRA receives properties in three ways: through donations; as the "default owner of last resort" following tax delinquency foreclosure proceedings where the property is not purchased by a private party; and by affirmative acquisition for specific developments through negotiated sales or eminent domain.

As is the nature of land banks, LRA maintains, markets and sells its inventory. It also demolishes those properties that are too deteriorated to rehabilitate or to make way for new developments.

LRA receives approximately 500 pieces of property yearly. In 2002, the authority took on 579 parcels and sold 435; in 2003, it received 454 properties and sold 368. In 2004, it received 412 properties and sold 552.

LRA's priorities include marketing properties for development in accordance with the city's recently completed land use plan; demolishing LRA properties that pose a public safety hazard and properties that are a barrier to development; and attracting developers who will purchase numerous LRA parcels in conjunction with adjacent private parcels to form large tracts of land for development.

For more information on LRA, contact Ivie Clay, director of communications and marketing for the St. Louis Development Corp., at (314) 622-3400.