February 20, 2020 – The housing bubble had burst and the nation was reeling from recession. The City of Cleveland and Cuyahoga County were feeling the pain more than most places in 2009. Foreclosures were mounting by the thousands, and Fannie Mae and other lenders were desperate for a way to off-load the abandoned properties filling their books.
They found it in a land bank, a nonprofit corporation that emerged as a haven for abandoned properties with the mission of turning them around. A novel stream of revenue enabled Cleveland to acquire vacant houses and lots, demolish blighted homes, and rehab and resell others to arrest the abandonment eroding neighborhood housing markets.
During its first 10 years, the Cuyahoga Land Bank acquired some 11,000 vacant houses, lots and businesses, even a few shopping malls. And returning them to local tax rolls reaped nearly $1.4 billion in higher property values, sales, tax revenue and other benefits, a recent analysis of its work suggests.
Some 180 land banks operate in the United States, including two in southwestern Pennsylvania. Few, however, can match the scale of Cuyahoga County’s impact. And that’s particularly true of the land bank created in 2014 to tackle the City of Pittsburgh’s vacant property problem.
The Pittsburgh Land Bank has acquired only one tax-delinquent property in five years—a vacant lot in the Larimer neighborhood of a city that counts 20 percent of its taxable property as vacant.
The Cuyahoga Land Bank has the advantage of being one of the richest in the nation. Its $8 million-a-year budget is 10 times what the Pittsburgh Land Bank has to work with.
But southwestern Pennsylvania’s other land bank has managed to do more with less money than the one serving the city. The Tri-COG Land Bank, which opened in 2018, acquired 32 properties in the Mon Valley and east suburbs by the end of 2019. It entered this year with 18 more on its acquisition list and the expectation of adding 30 properties to its inventory by New Year’s Eve.
“This work is incremental, house by house, lot by lot. But, it’s important,” said An Lewis, executive director of the Tri-COG Land Bank and Steel Rivers Council of Governments. “Blight is like cancer. If you don’t treat it, it will definitely grow.”
Cost of inaction
The problem is more than the ugliness that empty weed-choked lots and abandoned houses with drooping rain gutters and broken windows inflict on neighborhoods. They carry a staggering price paid in public dollars and lost equity for homeowners with the misfortune of living nearby.
Vacancy and blight consume upwards of $10.7 million a year in code enforcement, police and fire services in the 41 Allegheny County municipalities covered by the Steel Rivers and Turtle Creek Valley councils of government. Municipalities lose $8.6 million to delinquent property taxes. Nearby properties lose up to $247 million of their value, which robs municipalities of another $9.7 million in tax revenue, a blight analysis commissioned by the two groups reports.
Nearly 24,000 vacant properties reside in the city of Pittsburgh, including 7,500 structures. Their delinquent taxes cost the city $4.8 million in lost revenue a year, according to a study by the Center for Community Progress, a national land-recycling nonprofit. Another $4.8 million is lost in property values that have been downgraded by blight. Police, fire and code enforcement services add another $2 million, raising the total annual cost of blight in the city to $9.1 million.
Government systems that address vacant, tax-delinquent property often exacerbate the problem. Cumbersome tax foreclosure systems, for example, discourage buyers interested in turning them around. In the city of Pittsburgh, it can take two or more years to clear the title of a single property and send it to treasurer’s sale for auction.
“Most states, unfortunately, have processes that are drawn out for years,” said Kim Graziani, vice president and director of national technical assistance at the Center for Community Progress. “And time is the worst enemy of vacant, tax-delinquent properties.”
‘Like a firehose’
Ohio adopted legislation in 2006 that expedited the tax foreclosure process statewide. The Cuyahoga Land Bank was created in response to what happened when the new law met the crippling recession and housing crisis that visited the region one year later.
As 2007 approached, the rate of foreclosures and delinquencies “were spiking like crazy,” said Gus Frangos, president and general counsel of the Cuyahoga Land Bank. By the following year, the numbers had almost tripled. “It was like nothing we’d ever seen. These properties were coming out of this expedited [foreclosure] process like a firehose.
“We needed to create an entity to take these properties in, triage them and try to turn lemons into lemonade.”
He helped win bipartisan support for a state law allowing Ohio counties to give land banks a share of the penalties and interest collected from delinquent property tax settlements and a reliable source of funds, without which, he argued, they’d be “like a car without an engine.”
It’s a law Pennsylvania doesn’t have. In Cuyahoga County, the land bank’s stake in delinquent tax settlements accounts for 90 percent of its more than $8 million annual budget.
The Cuyahoga Land Bank’s reach is long by U.S. standards. With a staff of 32, it has moved aggressively against vacancy and blight to help mend local real estate markets that had been wounded by recession. It acquires vacant properties at a rate of about 900 a month. And in 10 years, it demolished nearly 7,000 properties for redevelopment, rehabbed 2,100 houses for resale and helped neighborhoods assemble properties to advance their revitalization plans.
Pittsburgh is a different story. The Pittsburgh Land Bank has developed slowly since it was created by city ordinance as an incorporated public entity in 2014. Five years later, it still had no staff of its own. Only in January of this year did the board hire an interim executive director.
The years were mostly spent putting together a board of directors and working out the policies and procedures for doing battle with blight, with Urban Redevelopment Authority of Pittsburgh staff handling the administrative duties. The land bank’s strategic plan outlines a cautious approach. It describes 2018 as a pilot year, with a $800,000 budget mostly financed with public and foundation dollars. As of January of this year, one vacant parcel had been acquired.
“I think the board right now is looking at taking it fairly slowly to figure out where there are choke-points and problems in the process,” said Nathan Clark, the URA’s director of real estate and associate counsel. He referred questions about policy and future plans to the Rev. Ricky Burgess, a city councilman and chairman of the land bank board of directors. Rev. Burgess did not respond to requests to discuss those issues.
The land bank isn’t expected to look at acquiring privately owned vacant properties anytime soon. One agreement it has been drafting would give it a pipeline to thousands of vacant houses and lots the city owns from years of taking them in tax foreclosure. Once transferred to the land bank, they would be readied for market and offered for sale. As of January, that was still a promising idea waiting to happen.
At the December meeting of the land bank board, several community nonprofits that hope the land bank can help their neighborhood renewal efforts implored the board to do more, starting with hiring a staff and securing adequate funding. One of them was the Pittsburgh Community Reinvestment Group, a decades-long advocate of creating a land bank to deal with vacancy and blight in the region.
“The land bank is in dire need of both financial and human capital to make it a functional land bank,” said Chris Sandvig, director of policy for the nonprofit, a membership organization for groups working to revitalize Allegheny County neighborhoods. “There has been some debate recently whether the land bank is the best tool for this type of work. We feel strongly that it hasn’t been given the opportunity.
“Aside from the one property that has been acquired, it hasn’t been tested to see whether it’s a success or failure. We will not know that until we have the resources available and try to use this system at the scale we had hoped to see.”
Progress in the east
During the Tri-COG Land Bank’s first 18 months, its staff of three fanned out across the eastern suburbs of Allegheny County, inspecting 125 vacant properties and acquiring 32 of them as they worked out the kinks in the land bank’s blight recycling strategy.
The land bank recently put its first properties on sale. And its budget anticipates adding another 30 to its inventory this year, an annual harvest Lewis said could grow as the land bank matures.
Decisions to acquire properties are based on community needs and redevelopment strategies, not on whether there is a buyer in hand. The land bank, for example, is working on an agreement that would make it the property-acquisition arm of an initiative in Etna, Millvale and Sharpsburg for expanding affordable housing options as local market prices rise.
The scale of a land bank’s ambitions is tempered by the risk of acquiring more vacant properties than it can afford to maintain and usher to market without them languishing as eyesores. Like others in the state, the Tri-COG land bank lacks a dedicated funding source. The state law that established land banks is mute about how to fund them. “Pennsylvania creates wonderful enabling legislation, but with no money,” Lewis said. “That’s only half of the solution.”
Foundation grants totaling $1.5 million account for the lion’s share of the revenue the land bank has to work with in its first three years. It gets about $200,000 a year from a fee it charges its member municipalities that’s based on the amount of delinquent property tax they collect—a deal the land bank had to negotiate with the county and each of the 25 municipalities and four school districts it has recruited so far.
But the more than 27,000 vacant properties identified in the Mon Valley and east suburbs presents a problem too large for the land bank to handle alone.
How big of a bite land banks take out of blight also depends on the efficiency of tax foreclosure systems and how well municipalities perform basic property services “Even if they have all the money in the world,” Graziani said, “land banks can’t truly reverse disinvestment if there aren’t mechanisms to prevent properties from going into decline and active tax collection and housing and building code enforcement. The land bank, ultimately, is the last-case scenario.”