Land bank in KC is a step closer to reality

When a land bank was established in Flint, Mich., in 2002, the city was suffering the effects of decades of large-scale population loss and property abandonment.

Four years later, a Michigan State University study estimated that the land bank’s activities in Flint had boosted property values in Genesee County, Mich., by more than $100 million.

“We were able to change the trajectory of a lot of neighborhoods,” said Dan Kildee, who helped develop the Genesee County land bank and ran it for eight years. “We removed the blight, and the value of surrounding properties was restored back to what it would be in a more rational market condition.”

Results such as those are why Kansas City officials have pressed hard for Missouri lawmakers to give them the authority to set up a land bank of their own. And at the midpoint of the 2012 legislative session, their efforts appear to be paying off.

The Missouri House overwhelmingly approved a bill last week giving the city the authority to establish a land bank, with only 10 dissenting votes. On Monday, a Senate committee approved nearly identical legislation sponsored by Democratic Minority Leader Victor Callahan of Independence.

“I really think we’re going to get this done,” said Rep. Noel Torpey, an Independence Republican and one of the bill’s sponsors. “It’s not a done deal yet, but I’m very hopeful.”

Kansas City is not alone. Lawmakers in a handful of states — from Pennsylvania to Nebraska — are considering land banks as a possible tool to help combat urban blight.

The idea of the land bank is to establish a local entity with the authority to acquire vacant properties and set them aside for rehab or resale so that they can be put back on the tax rolls.

Jim Kelly Jr., a professor at the University of Notre Dame law school who specializes in community development law, said the foreclosure crisis of the last few years has added to a chronic problem that has persisted in urban centers for decades.

“Cities are looking for effective interventions, and land banking is absolutely catching on,” Kelly said.

It’s an idea that can have a dramatic long-term impact on communities, said Frank Alexander, a law professor at Emory University in Atlanta, who recently wrote a book on land banks. Alexander also helped draft the Kansas City land bank legislation.

“What many communities are experiencing today is an increased number of properties that are locked in a dead status,” Alexander said. “They are not accessible to the marketplace because they are in such bad shape there is no market demand, and they are imposing significant costs to the neighborhood and city.”

A study last year by the Federal Reserve Bank of Kansas City found that there were 12,000 vacant residential properties in the city. In some areas, the vacancy rate ranged as high as 25 percent. Upkeep and maintenance on vacant property cost the city about $1 million a year.

According to a 2001 study by Temple University, houses within 150 feet of a vacant or abandoned property experienced an average net loss of $7,627 in value.

The way abandoned properties are currently handled is “a completely irrational system,” Kildee said.

Currently, properties that are in such a state of disrepair that they go unsold at tax sale auctions are turned over to the Land Trust of Jackson County. But the trust has no budget to maintain or fix the properties and only has the authority to sell them to private investors willing to pay at least two-thirds of the value.

“This is a system that operates under the assumption that all this land needs is some new responsible owner,” Kildee said. “In truth, in many cases the market is not capable of absorbing all this property.”

The land bank allows local government to acquire abandoned property instead of waiting for speculators who often have no intention of fixing it up to have first shot at a tax auction, Kildee noted.

“The system was tilted in the favor of speculative interests that treat land not as real estate, but as an investment on paper that can be bought and sold,” Kildee explained. “The shame of that is what happens to that land really has an impact on the people who live next door, down the street and down the block.”

Instead of just putting the property back on the markets, the worst homes could be demolished, with the land sold to nearby homeowners or developers or turned into community gardens or parks. Properties that can be fixed up could then be resold or donated to community groups, Kildee noted.

However, the idea is not without its critics.

Audrey Spalding, a policy analyst with the St. Louis-based conservative think tank the Show-Me Institute, provided lawmakers with a long list of concerns about a potential Kansas City land bank, ranging from its ability to incur debt to allowing the government to outbid private investors.

But ultimately her main concern is a belief that a land bank would be “an unnecessary expansion of government power.”

Numerous development subsidies already are available at the state and local level, she said, which should be enough to assist areas “beset by vacancy without attempting to directly manage development through land ownership and control.”

Kildee pointed out that government already is involved in the process of dealing with abandoned property and that “they are just involved in a way that is completely irrational. Government involvement can either be thoughtful or continue to be a 19th century system in a 21st century world.”

For all the successes credited to its land bank, however, Flint still has its problems. The long-term issue of depopulation that cut the number of people living in the city almost in half over the last 40 years has given way to the effects of the recession and foreclosure crisis.

As a result, the city still struggles with a large number of vacant and abandoned properties.

“The problem with vacant properties in cities around the country didn’t spring up overnight,” Kelly said. “So any potential solution is going to take a while. Land banking is a long-term solution to a chronic problem.”

Alexander agreed that Kansas City shouldn’t expect a land bank to be the silver bullet.

“A land bank won’t solve declining socioeconomic conditions,” he said. “A land bank won’t rebuild anything by itself. But a land bank as a tool to get control of properties that are causing the harm can be very useful.”