When the City of Philadelphia passed an ordinance this week, they became the largest city in the US to create a municipal land bank. They certainly wont be the last. As new techniques are sought to tackle the nationwide problems of unused, foreclosed and abandoned property, chances are a municipal land bank is headed to a commercial real estate market near you.
Created under Pennsylvania’s Land Bank Act of 2012, the Philadelphia Land Bank takes on the problem of portfolios of tax-delinquent property using an updated, streamlined approach as compared to decades past. Before the law, such properties in Philadelphia were administered by multiple governmental departments with differing constituencies and purposes. Selling a foreclosed property has its significant challenges even without city involvement — as many agents who dial the phone into bank REO departments can attest. Add multiple bureaucratic layers of city government into the process, and you’ve perfected a recipe for inertia with a side of gridlock.
With 40,000 vacant parcels of land in Philadelphia, a quarter of which are owned by the city, the effort to reduce that number needs to cut through the red tape, and the land bank certainly appears to fit the bill. The problem for the city is twofold: reduce the number of vacant parcels held, while, ironically, increasing the same number. The first requirement of any two-way street is that it be wide enough, and the legislation has laid the groundwork for heavy traffic.
Doing Both Sales And Acquisitions
The city needs not only to reduce the time to market for foreclosed and abandoned properties it already owns; it also needs to speed up its own acquisitions process for tax-delinquent properties that need to go to market but can’t. You can’t have tax delinquency without tax delinquents, and these parties tend not to make the most conscientious property owners. Consolidating management of these properties presents at long last a single point of negotiation for private market actors to engage; the process of returning these plots to private ownership can only get faster.
According to JD Supra, the land bank created by the City Council still needs to be incorporated, the city needs to provide it a budget, appoint a board of directors, and assign it the vacant land. When that happens…
[…] the city anticipates that developers and other prospective purchasers will have a much easier time navigating the administrative process and acquiring city-owned property. Further, because the land bank will be able to acquire tax-delinquent property more easily, purchasers may have the opportunity to acquire larger blocks of land all at once without having to track down private owners or purchase at tax sales.
As for other benefits, the city also anticipates an increase in its tax revenue as formerly vacant land is developed, and city residents can look forward to enhanced safety as formerly vacant properties are developed.
Not Just The 2008 Crisis
The longer-term decline in industrialization seen by many areas, added to the wave of foreclosures from the 2008 recession amounts to a tenacious problem in both property markets and civics. New ideas to cut these properties loose from government and send them back into private hands are welcome ideas.
(Photo credit: Flodigrip’s world)