How to Fund Land Banks

Shelterforce recently published an article detailing how land banks across the country fund their activities.

While many former industrial cities and rural communities have struggled with systemic vacancy and abandonment for decades, the 2008 housing crisis wrecked neighborhoods in virtually every corner of the nation. As local and state officials in urban, suburban, and rural areas sought new tools and strategies to stem and reverse the negative impacts of vacant, abandoned, and deteriorated properties, land banks emerged as a top priority. Eleven states passed land bank legislation between 2009 and 2016, and according to ongoing research by the Center of Community Progress, there are over 170 land banks currently operating in the United States.

Land banks are generally defined as public entities, usually public nonprofit corporations or governmental entities, that are designed to play a lead role in returning vacant, abandoned, and tax-delinquent properties to productive uses that are consistent with community priorities. Land banks vary dramatically, reflecting the tool’s flexibility in meeting a community’s unique needs. Land banks are creating pipelines of properties to support quality affordable housing and equitable development, helping communities address former industrial sites (brownfields), assisting with recovery efforts from natural disasters, and engaging residents in innovative vacant land reuse strategies. Though we are 10 years removed from the housing crisis, the need for land banks only seems to grow, as systemic poverty and inequality continue to undermine the stability of neighborhoods in virtually every city and region.

How are land banks being funded, given the inherent challenges of working in some of the most disinvested neighborhoods, where weak market conditions often fail to attract responsible investment? Various funding strategies that have been tried over the last 10 years provide some lessons about what’s successful and suggest some trends to expect going forward.

Lesson No. 1 — Land banks work best with a predictable, recurring funding source.

Stabilizing and revitalizing disinvested neighborhoods is not an overnight endeavor. Land banks require planning, patience, and partnerships—and dedicated, recurring funding affords land banks the opportunity to carry out meaningful community engagement, pursue long-term strategies, and pilot innovative partnerships.

Ohio is the only state that has meaningfully solved the land bank funding challenge. Its Delinquent Tax Assessment Collection (DTAC) is the standard of excellence in the field. Included in Ohio’s 2009 land bank enabling legislation, this provision allows a county (land banks can only be created at the county level in Ohio) to annually direct up to 5 percent of delinquent property taxes, interest, and penalties collected to the county’s land bank for dedicated, discretionary use. According to the Western Reserve Land Conservancy, about two-thirds of all land banks in Ohio receive the full 5 percent of DTAC funds. To put this in perspective, the Cuyahoga County Land Bank (which covers Cleveland) receives approximately $7 million annually in DTAC funding, and the Lucas County Land Bank(which covers Toledo) receives about $1.4 million. Both land banks are leaders in the national field, illustrating that when practitioners don’t have to focus on chasing the next grant dollar to sustain operations, they can focus instead on innovating partnerships and programs and sustaining progress toward long-term community goals.

The Tri-COG Land Bank, a multi-jurisdictional entity serving the region of Allegheny County, Pennsylvania, which is dotted with small, struggling former steel towns, pulled off a nearly impossible task; it emulated Ohio’s DTAC strategy at the local level. Absent state legislation, the Tri-COG leaders understood a multiyear educational campaign with local leaders was the only way to secure buy-in for both the land bank and funding commitments. After three years of genuine and inclusive engagement, Tri-COG launched in 2017 with more than 25 taxing jurisdictions (municipalities, school districts, and the county) voluntarily contributing 5 percent of the total amount of delinquent taxes collected (principal only) from the prior year to provide the land bank with dedicated, recurring funding. The impressive commitments from across the region also attracted a substantial, multi-year commitment from a local foundation.

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