What is a Land Bank?
New York’s first land banks were established in 2012, pursuant to the passage of the New York Land Bank Act. The Act allows foreclosing governmental units (local units of government that foreclose on real property for delinquent taxes) to form land banks. Land banks are local public authorities, accountable to the units of government which created them, designed to acquire, stabilize, assemble, and facilitate the redevelopment of blighted and abandoned properties, in order for them to be returned to productive use. Returning these formerly abandoned properties to productive use improves quality of life for surrounding residents and helps to grow the community’s local property tax base by encouraging renovation that improves the value of the property the land bank sells, as well as surrounding property values.
The Chemung County Property Development Corporation (the “land bank”) was created in July of 2016 and incorporated in September of that year.
Why were land banks created?
Any community considering the creation of a land bank should assess a number of factors to determine if a land bank 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 little to no market value
• Properties with delinquent taxes in excess of fair market value
• Properties with title problems
• Inflexible policies that dictate the disposition of public property, denying local governments the chance to be strategic and nimble
• The speculation and uncertainty inherent in the auction sale of tax-foreclosed properties
Some jurisdictions may already have an entity or agency (e.g. a redevelopment authority) that is empowered with tools to effectively take control of large inventories of problem properties and return them to productive use, obviating the need for a land bank. In some cases, however, such entities are focused primarily on development, rather than on blight elimination and stabilization strategies in more distressed neighborhoods. Where this is the case, the community may still want to consider creating a land bank or land banking program.
How do Land Banks work?
Land banks are designed to foster economic and community development by acquiring, holding, managing, developing and marketing these 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 the following powers:
• Obtain property at low or no cost through the tax foreclosure process
• Hold land tax-free
• Clear title and/or extinguish back taxes
• Lease properties for temporary uses
• Negotiate sales based not only on the highest bid but also on the outcome that most closely aligns with community needs, such as workforce housing, a grocery store, or expanded recreational space
We want to stress that a land bank is not a “silver bullet” for communities struggling with blight. Though land banks are uniquely designed to help reduce 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.
How is a land bank funded?
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. Land banks in certain states have received significant funding from the federal Hardest Hit Funds (for example, Michigan and Ohio) and the National Mortgage Settlement Funds (for example, New York and Illinois).
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.
What kinds of properties do land banks acquire?
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.
How is a land bank different from other anti-blight programs?
In a few states, legislation has been passed that grants redevelopment authorities many of the same powers as land banks. In Louisiana, for example, some redevelopment authorities can also function as land banks. However, in most states, redevelopment authorities and land banks differ both in terms of their legal powers and their mission. Land banks typically implement disposition policies that allow greater flexibility than a redevelopment authority in terms of transferees and consideration. However, unlike many redevelopment authorities, land banks do not have the power of eminent domain, nor do land banks have the power to tax. As for mission, many land banks are focused on acquiring, stabilizing and returning to productive use those properties that are considered to have the most blighting influence in a community. These are properties that may not have an immediate redevelopment opportunity, but are destabilizing neighborhoods and undermining quality of life. In comparison, a redevelopment authority is typically focused on properties with near-term redevelopment potential and on large scale development projects that align with highly visible and long-term economic development goals.
How many land banks are there?
As of 2014, there are approximately 120 land banks and land banking programs throughout the country. In July of 2011, Governor Cuomo signed into law the New York State Not-for-Profit Corporation Law which permits the creation of 25 land banks in New York State; New York currently has 20 active land banks.
How do land banks work with other anti-blight programs?
The CCPDC has been awarded funding from the Empire State Poverty Reduction Initiative (ESPRI) to provide clean, safe and affordable rental housing to those living in poverty. The overall objective of this program is to improve the quality and quantity of rental housing in the most impoverished neighborhoods in the City of Elmira.
With the goals of both programs to improve the housing quality in the county, the land bank is able to leverage funds from both programs and increase our ability to reduce blighted properties, provide rehabbed, single family homes and rental properties in Elmira.