Meet NY’s newest public authorities: land banks
New York’s Land Bank Act, which was enacted in July, allows local governments to establish land banks in order to acquire blighted properties and “bank” them for longterm redevelopment plans. Land banks created under this legislation will be local public authorities subject to oversight from the Empire State Development Corporation and classified as type C not-for-profit corporations (similar to LDCs). Only 10 land banks are authorized, perhaps reflecting recent public authorities reforms intended to reduce the number of public authorities in the state.
The land bank model was created in the 70s and pioneered by local governments in Ohio and Michigan in the 90s and early 2000s. The way it works, briefly, is that the land bank acquires vacant, abandoned, and foreclosed properties from the municipality and then expedites the process of clearing title, making it easier to return the properties to productive, tax-generating uses. The land bank has a variety of options for disposing of cleaned up properties: it can hold onto the parcels or “bank” them until it’s assembled a large enough area for a planned redevelopment; it can redevelop the properties itself and serve as their landlord; it can convert the parcels to open space, government uses, or affordable housing; or it can sell the properties to private developers and use the proceeds to finance the clean up of additional parcels. Ideally, the land bank’s profits allow it to become financially self-supporting.
Cleaning up and redeveloping abandoned lots and foreclosed land is good for property values and economic development. As Assemblyman Sam Hoyt, one of the sponsors of the New York legislation, explained:
Just as one vacant building can set off a cycle of contagious blight, with declining property values leading to further abandonments, a smart redevelopment plan, implemented by a land bank that can acquire, hold and assemble parcels of land for development, green space, or public works projects can reverse this non-virtuous cycle. Their work adds value to surrounding properties and strengthens local real estate markets.
Using land banks to redevelop abandoned and tax-delinquent land is also a benefit for municipal finances, as the cleaned up properties generate more tax revenues and impose fewer service delivery and maintenance costs. Because of these benefits, land banks have been put forward as a possible solution to some of the problems being faced by upstate cities, especially the financial impacts caused by longterm population declines, aging infrastructure, and more recent problems caused by the subprime mortgage crisis.
Unlike land banks in some other states—but in line with their classification as public authorities—New York’s land banks are authorized to issue bonds, notes, and other types of debt. This could be invaluable to land banks created by cash-strapped local governments, but it could also raise concerns about government spending.
The Land Bank Act, however, includes a number of transparency and accountability mechanisms that go beyond the requirements of the Public Authorities Law. Aside from being overseen by their local governments and the Empire State Development Corporation, land banks are prohibited from using eminent domain and they have to comply with strict inventory and public disclosure provisions. And as not-for-profit corporations, they’re also subject to oversight from the Attorney General.
Empire State Development will begin approving land bank applications in early 2012. The first round of applications are due by March 30, and no more than five applications will be accepted. The criteria that will be considered include the nature and extent of intergovernmental cooperation, the extent of blight problems and other socioeconomic conditions, the ability of sponsoring local governments to acquire, manage, and dispose of property, the priorities for the use of acquired property, available financial resources, and the geographic area of the proposed land banks.
For more information about land banks:
- Empire State Development’s Land Bank Approval Guidelines (Nov. 2011)
- NYS Assn. of Counties, New York’s Land Bank Act (Nov. 2011)
- Center for Community Progress, Land Banks and Land Banking (Jun. 2011)
- U.S. Dept. of Housing and Urban Dev., Revitalizing Foreclosed Properties with Land Banks (Aug. 2009)
- City of Cleveland Dept. of Economic Dev., Best Practices in Land Bank Operation (Jun. 2005)