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Cascade: No. 82, Winter/Spring 2013

Pennsylvania Legislation Enables Municipalities to Create Land Banks*

Pennsylvania municipalities have a new tool to acquire, manage, and dispose of vacant, abandoned, and tax-delinquent properties to facilitate their redevelopment and reuse.

Legislation effective in December 2012 states that land banks may be created in Pennsylvania by a city, county, borough, township, or an incorporated town with a population of more than 10,000 residents, or two or more municipalities with populations of less than 10,000 residents that enter into an intergovernmental cooperation agreement (ICA). School districts may be part of an ICA.1

Land banks address the difficult predicament in which many municipalities find themselves. They’re often able to acquire some properties, but not others, in areas targeted for redevelopment. A particular challenge is acquiring the title to the properties. It is often difficult, if not impossible, to find the owners of vacant and tax-delinquent properties and obtain clear titles to the properties. As a result, properties may stay vacant for years with serious consequences for adjacent properties and the community.

As the legislation notes, vacant, abandoned, and tax-delinquent properties impose significant costs on urban, suburban, and rural communities by lowering property values, increasing fire and police protection costs, decreasing tax revenues, and undermining community cohesion.

Land Bank Powers

A land bank is a “public body” that may be created by adoption of an ordinance. Its powers include the ability to:

  • Acquire properties by tax foreclosure, purchase, lease-purchase agreement, donation, or transfer from a municipality or redevelopment authority;
  • Develop, construct, rehabilitate, or demolish properties;
  • Sell, transfer, lease, or mortgage properties;
  • Discharge and extinguish tax liens and claims of participating jurisdictions and file court actions to obtain a clear title for single or multiple properties;
  • Purchase foreclosed properties at judicial sales, giving the land bank a free and clear title to the properties; and
  • Create partnerships, joint ventures, and other collaborative relationships with municipalities and other public and private entities.

The legislation explicitly excludes eminent domain as a power of land banks.

Land Bank Funding

The legislation does not provide any state appropriations to establish or operate a land bank. However, it states that a land bank may:

  • Charge rents and fees and contract for management of the properties it owns;
  • Receive grants and loans from the federal government, the Commonwealth of Pennsylvania, municipalities, and private sources;
  • Borrow money and issue revenue bonds that are exempt from state and local taxes; and
  • Enter into agreements with local jurisdictions and school districts to collect up to 50 percent of aggregate tax revenues for up to five years on properties conveyed by the land bank.

According to the legislation, the local government(s) that creates a land bank may establish priorities for the reuse of properties, including public spaces; affordable housing; retail, commercial, and industrial activities; and conservation.

A Pennsylvania land bank must create an inventory of properties that it owns and make the inventory public. It must also submit an annual audit of income and expenses and a report of activities to the Pennsylvania Department of Community and Economic Development and participating municipalities.

History

There are more than 75 land banks in operation nationally, explained Frank S. Alexander, professor at Emory University School of Law and co-founder of the Center for Community Progress. The first generation of land banks in the country was created between 1973 and 1991 in St. Louis, Cleveland, Louisville, and Atlanta, while the second generation of land banking programs emerged in Michigan (2001) and Ohio (2009), he said. Alexander said that Pennsylvania’s legislation is comprehensive third-generation legislation and that parallel legislation has been passed in New York (2011),2 Georgia (2012), and Missouri (2012).3

Key Questions

Questions facing communities deciding whether to establish a land bank include:4

  • Will your community benefit from a land bank? Is a countywide or regionwide land bank feasible?
  • Will the land bank be located in a city agency or will it be a quasi-governmental entity?
  • Does your community have an inventory of vacant properties? If not, what is the best way to create and maintain an accurate inventory?
  • How will land bank properties be marketed so that they will be transferred quickly to homeowners or developers who have the intention and capacity to redevelop the properties, rather than hold them for speculative purposes? What conditions can be placed on land bank property transfers so that they revert to the land bank if the buyer doesn’t redevelop the properties?
  • Can the land bank overcome political boundaries and form agreements with municipalities to expedite the tax foreclosure process?

The new land bank legislation in Pennsylvania is the culmination of a decade of work on the vacant property issue and several years of advocacy on land banks by several organizations, including the Housing Alliance of Pennsylvania (Housing Alliance) and the Philadelphia Association of Community Development Corporations (PACDC). The Housing Alliance led a diverse statewide coalition of developers, community development leaders, and local government officials who advocated for enabling legislation.5

Cindy Daley, policy director of the Housing Alliance, said that the legislation gives municipalities and counties a planning tool they can use in a regional approach that has maximum impact for strategic acquisition and property reuse. The Housing Alliance is organizing training events in different parts of Pennsylvania on land banks.

Communities Explore Land Banks

Land banks are being actively explored in Philadelphia and Pittsburgh with negotiations underway between the respective mayors’ offices, city councils, and housing and redevelopment agencies.

Rick Sauer, executive director of the PACDC, said that it is presently very difficult to acquire all vacant properties on a block for redevelopment, resulting in “gap tooth” development. Philadelphia has about 40,000 vacant properties, of which about 75 percent are privately owned and the remaining balance is owned by the city’s Department of Public Property (DPP), the Philadelphia Redevelopment Authority (PRA), the Philadelphia Housing Development Corporation, and the Philadelphia Housing Authority (PHA), according to a report prepared for the PACDC and the PRA.6 Vacant properties result in an estimated $3.6 billion reduction in property values and over $20 million in city maintenance costs each year, the report stated.

Last year, the city of Philadelphia adopted written policies for the sale and reuse of city-owned properties by the DPP, the PRA, and the Philadelphia Housing Development Corporation and created a website that lists and maps properties owned by the three entities.7 The city has designated the PRA as the lead agency for disposition of vacant city-owned properties. Philadelphia’s Department of Licenses and Inspections has dedicated additional legal resources to find vacant property owners and has instituted new code enforcement measures for vacant properties.

Sauer said that a Philadelphia land bank should have acquisition and reuse policies that promote a range of reuses for vacant properties. He said, “In neighborhoods with rapidly appreciating housing values, this should include affordable and mixed-income development to promote balanced development that will serve a range of household income levels. On the other hand, a land bank can help create a market in very low-income neighborhoods and support interim uses for vacant properties.” Sauer added that a land bank’s policies for dealing with vacant properties ought to be “transparent, predictable, and accountable” to neighborhood residents and the public and private sectors.

Meanwhile, one rural community examining how to start a land bank is Venango County, Pennsylvania. Karen Wenner, shared municipal services planner in the county, said that the county could use limited community development block grant funds and build up capital resources, but it would be several years before the bank could be active. The need is great: A 2009 housing market study found that the county had over 4,000 vacant homes. Wenner said that many county residents can’t afford to buy houses due to layoffs and declining wages.

For information about land banks, contact Kim Graziani of the Center for Community Progress at 877-542-4842, ext. 159 or kgraziani@communityprogress.net E-Mail, http://www.communityprogress.net/about-pages-4.php External Link; Cindy Daley at 717-909-2006 or cindy@housingalliancepa.org E-Mail, http://www.housingalliancepa.org/ External Link; Rick Sauer at 215-732-5829 or rsauer@pacdc.org E-Mail, http://www.pacdc.org/ External Link; and Karen Wenner at 814-432-9675 or kwenner@co.venango.pa.us E-Mail.

Useful resources include www.housingpolicy.org/ External Link and http://www.foreclosure-response.org/ External Link.

  • * The views expressed here are those of the author and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
  • 1 See http://tinyurl.com/at2qps3 External Link.
  • 2 The governing body for New York’s land banks is the state’s Empire State Development agency. See http://www.esd.ny.gov/aboutus.html External Link.
  • 3 Alexander distinguishes between the generations of land banks in chapter 2 of his book Land Banks and Land Banking, which is available at http://tinyurl.com/amm39ts External Link.
  • 4 Karen Black, May 8 Consulting, contributed to this list of questions.
  • 5 The Housing Alliance estimates that there are 300,000 vacant properties in Pennsylvania.
  • 6 See http://tinyurl.com/bdvvcst External Link.
  • 7 See http://phillylandworks.wordpress.com/ External Link. Note: The policies and website do not include PHA-owned properties.