Can Land Banks Get Us Out of This Mess?

The Great Recession of 2008 tore through small towns and industrial cities, leaving lasting damage throughout the Great Lakes region and other legacy cities. The devastation of the foreclosure crisis can still be felt in the form of hypervacancy and underwater mortgages, an inversion of the affordability crisis as it plays out on the coasts.

The Covid-19 recession may very well be broader. Already, small businesses and other commercial properties are feeling tremendous pressure, while the pandemic’s toll on homeowners is still unclear. Even though the driver of this economic downturn is much different from the last one, some lawmakers are betting that one of the tools that took off in the wake of the foreclosure crisis can be expanded to protect towns and cities from the havoc that the pandemic-fueled economic downtown stands to wreak.

That tool is land banking — a process for local governments to manage properties that are vacant, abandoned or foreclosed. Land banks are quasi-public agencies that are entitled to acquire and maintain distressed properties and return them to productive use. A new bill before Congress, the National Land Bank Network Act, would both expand and fortify the nation’s network of land banks in hopes of establishing the infrastructure for dealing with the fallout of the pandemic before it happens.

Supporters of the concept say that land banking could be an answer to two major crises playing out right now. Cities and counties that can marshal their vacant properties stand to avoid the permanent scars of the recession. They can also rebuild their communities fairly to benefit disadvantaged groups — and prevent the pandemic from exacerbating the social inequalities that helped set off the current wave of nationwide protests for racial justice.

“If you can’t control your landscape, you can’t control your future,” says Michigan Representative Dan Kildee, who introduced the National Land Bank Network Act on June 4.

Kildee has devoted much of his career to the issues of land use and disrepair. He founded the Genesee County Land Bank, the first of its kind, in 2002 to serve Flint, Michigan. Kildee, a Democrat, partnered on the new bill with Georgia Representative Drew Ferguson, a Republican; both congressmen serve as the chief deputy whip for their respective House conferences. The bipartisan backing for the bill reflects the fact that the economic fallout from the pandemic is unlikely to fall along neat partisan or geographic lines.

“This isn’t just going to be for the Ohios and Michigans and Illinoises of the world,” says Akilah Watkins-Butler, the president and CEO of the Center for Community Progress, a nonprofit devoted to property revitalization. “We may start to see land banking pop up in places like Miami or Houston.”

Such booming cities might not typically be associated with the kind of concentrated poverty and dilapidated homes that former industrial cities like Flint struggle with. But the coronavirus could deliver a punishing blow to once-thriving retail and restaurant districts, leading to fears of a longer-term slide into “blight” — a disputed term (similar to “Rust Belt) for vacant properties and their associated neighborhood disorder. Land banks can help arrest this physical deterioration of communities and property values. For little or no cost, land banks acquire abandoned properties with cloudy titles or steep back taxes, and hold them tax-free; then they can then lease or sell these properties, usually with an eye toward what a community needs rather than what the market will bear.

All told, there are some 200 land banks across 15 states. In four states — Georgia, Michigan, Ohio, and New York — local jurisdictions do enough land banking to support a state-level operation. In Flint, the Genesee County Land Bank has lured more than $100 million in economic development to the community through the redevelopment of thousands of homes. In under a decade, New York’s land banks have secured about $120 million in grants and private investment to address thousands of so-called “problem properties.”

If the number of communities that struggle with problem properties is likely to balloon, then the network of land banks should grow, too. That’s the thinking behind Kildee’s bill, which would authorize a modest $10 million to build out the national infrastructure (to be administered by a nonprofit group) and to fund grants for existing land banks. The bill also includes $5 million in annual funding to support the network.

The idea is to build out the network now, before the pandemic adds substantially to the nation’s afflicted inventory. A survey conducted by researchers at the University of Illinois, University of Chicago, Harvard Business School, and Harvard University found that more  than 100,000 U.S businesses had shuttered by early May, about 2% of all small businesses in the U.S. The numbers could get much bleaker: An April survey from Main Street America found that nearly 7.5 million small businesses are at risk of closing over the next few months.

Communities that can identify where property values are sliding and then take action can intervene before the bottom falls out. A tool that helps cities acquire land during a downturn can also help them to plan for longer-term community needs, like affordable housing. It’s not just Covid-19 that has leaders turning to land banks, either.

“We can’t forget that in light of what’s happening with Covid and what’s happening with the uprisings in American cities, we are also entering hurricane season, too,” Watkins-Butler says. “Another way that cities get inundated with vacant and dilapidated properties is through natural disasters. We’re on target to face one of our most turbulent hurricane seasons.”

Leaders such as Kildee and Ferguson hope that a national network of land banks can play a more preventative role in the response to this recession. Commercial and industrial properties look to be especially hard hit in this crisis, but residential properties could be in for another round of destabilization, too, if mortgage forbearance and other mitigation strategies aren’t enough to stave off a wave of mass foreclosures. Land banks could rescue these properties before they fall into disrepair — or in more prosperous communities, land banks could keep properties from falling into the hands of investors who are content to sit on them.

“Local officials are very wary of taking this on. This is why the network is so important,” Kildee says. “They are reluctant to form land banks because they don’t want to own property. But the fact is, they own the problem, whether they own the property or not.”

Most land banks came about as a response to rather dire emergency conditions. Because land banks played such a responsive role in the last crisis, they were not necessarily in the position always to think about race or historical patterns of land use. That’s not to say that land banks didn’t consider these factors, Watkins-Butler says, but just getting them up and running was a big lift. With some of the legal and technical challenges behind them, now land banks can foreground race and class as factors in community development.

The National Land Bank Network Act will help that effort, she says, by standardizing some of the work that land banks do. The bill is a boost to both the “tactical” and “visionary” challenges associated with distressed properties — “especially in communities historically left behind, disenfranchised, and racialized out of opportunities.”

The proposed legislation has already won the endorsement of a number of organizations who work in communities that suffer from hypervacancy, including the National Association of Real Estate Brokers, Habitat for Humanity International, and all four state-level land bank authorities. Kildee says that he and cosponsor Ferguson have seen how effective land banking can be, up close: Both are former mayors, of Flint and West Point, Georgia, respectively.

“It’s not just Dayton or Youngstown or Flint,” Kildee says. “It’s also really small places that are struggling due to changes in the economy. This set of tools is really intended to give those communities a fighting chance to at least control their own destiny.”

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