Land Bank Concept: Strategy for Foreclosure Home Mitigation

The land bank concept can be used as a way to manage foreclosure home inventories, according to community advocates.

This concept was developed and first implemented ten years ago in the cities of Louisville and Atlanta, according to law professor Frank Alexander, project director for community development and affordable housing at Emory University.

Alexander said that land banks can prevent communities from being eroded by volumes of foreclosure home inventories.

When land banks were first created years ago, they were initially launched to manage tax-foreclosed properties seized by local governments. But today, as foreclosure home inventories grow, local officials and housing advocates are now looking at land banks to manage their growth.

Under a land bank program, the county or city acquires or takes control of abandoned foreclosure homes instead of selling them at foreclosure auctions. They then rehabilitate these properties and then sell them or rent them out to lower-income families.

Dilapidated and abandoned houses are demolished and then the lands are sold to developers or nearby homeowners who have the financial capability to further develop the lands.

The Federal Housing and Economic Recovery Act, designed to stabilize the housing market, is expected to help more communities create land banks.

In May, Cuyahoga County of Ohio started a land bank to manage 35,000 unoccupied properties in the county, including Cleveland.

Overland Park City in Kansas has passed a resolution for the creation of a land bank and will use $700,000 from federal funding to buy, repair and resell foreclosure home units.

Last year, Maryland has passed a land bank proposal to help Baltimore handle its 30,000 foreclosure home units.

The states of New York and Pennsylvania have also been considering the land bank concept to mitigate their foreclosure problem.

The Genesee County Land Bank in Michigan, which was launched in 2002, has been lauded for its success in rehabilitating blighted neighborhoods in Flint. A study by the Michigan State University in 2006 found that the county’s land bank program hiked up property values across the county by over $100 million.

In 2007, the Genesee County Land Bank won the Fannie Mae Foundation Innovations Award in Affordable Housing, which was given by Harvard’s Kennedy School of Government.

Since its founding in 2002, the Genesee County Land Bank has fixed and sold 1,600 homes and earned $6.4 million from the sales. The money has helped the county fund nonprofit housing agencies which buy foreclosure home units to stabilize communities and encourage home ownership.