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November 20, 2014

UCSUR lecture: Land banks target vacant, delinquent properties

The state’s land-bank legislation of 2012 enabled Pittsburgh to create its own law this April to more easily gather vacant and tax-delinquent properties for resale and development.

New and proposed land banks all across the commonwealth make today “a really exciting time in Pennsylvania,” according to John Kromer, senior consultant with the Fels Institute of Government at the University of Pennsylvania. Kromer spoke as part of a Nov. 7 University Center for Social and Urban Research (UCSUR) seminar on “Land Banks & ‘Land Aid’ in Pennsylvania Cities & Towns.” Kromer is the author most recently of “Fixing Broken Cities” and has worked with the Housing Alliance of Pennsylvania. He also was director of housing for Philadelphia in the 1990s.

Real estate in parts of industrial towns is becoming more valuable today, he noted, although “it wasn’t so long ago that you couldn’t give away lots and buildings.”

To get rid of blight, redevelopment authorities such as Pittsburgh’s Urban Redevelopment Authority (URA) have long been able to purchase properties taken by local treasurers for sheriff’s sale due to delinquent tax and utility bills. The URA also has been able to work with courts, municipalities and utility companies to get rid of tax liens.

But finding the owners of abandoned properties and working through the courts and taxing authorities can take years for each property. Land banks now have unique powers under the 2012 law to expedite that process, as well as powers to convey the properties to developers more easily. Unlike redevelopment authorities, land banks can buy real estate and then sell it to a buyer — usually a developer — without having an established redevelopment agreement. They can acquire property headed for tax sales before the sheriff’s auction starts. They can work with the court to get quiet title judgments — the dismissal of liens — within 120 days, and they can do so for multiple properties in bulk.

Some Pennsylvania land banks, already created by counties as well as multiple and individual cities, are considering owning nothing, instead simply buying and conveying properties right away to known developers, so the land bank is not responsible for land or property maintenance.

Land banks in other state locales are only handling real estate transfers, leaving the community planning process for each property’s best use to smaller government entities.

Pittsburgh’s new law left many steps for its land bank formulation to be decided later.

It does not yet have a board, specific policies or even funding. But once in place it will be able to buy properties that are more than one year delinquent in property taxes and work quickly to get them to a developer with a plan for their productive use. The city’s land bank rules also call for community input on property use. The board will include community members from the three city council districts with the most blight. The new law also calls for owners of still-occupied properties to be offered new payment plans before their properties become eligible to be bought by the land bank.


The 2012 Pennsylvania law, Kromer said, “is the first time the state has recognized the issue of blight.” Until the 1960s, such laws weren’t needed because the state was growing, he said. “The issue of abandoned properties wasn’t a big deal.” Nor did city charters contain provisions to put specific departments in charge of handling the issue.

“That’s been difficult for cities,” he said. In Philadelphia in 1992, for instance, when Kromer headed the housing agency, the city’s philosophy was “we can deal with [vacant properties] in our target areas, where we are spending block grants” from the state. Otherwise, “we’re not going to look at it on a city-wide basis.” Not only was it too difficult at that time to acquire enough contiguous parcels from absent owners to attract developers, the city didn’t have a budget to deal with this issue.

The land-bank legislation recognizes the broader problem today, Kromer said. Blight had been regarded as an inner-city problem previously, but even such places as rural, small-town Mercer County now have held their own blight summits.

“Blight is emerging where it has never been before,” Kromer said.

In some neighboring states, land banks are being funded. Ohio gives multi-million dollar awards to land banks to buy lots and rehab vacant properties. In New York, legal settlements with mortgage lenders over practices that fueled the recent recession have given land banks money. Pennsylvania, however, has not appropriated money for land banks, so funding remains a local issue. In Schuylkill County, for instance, local voters gave its land bank a small blight fund.

Without permanent funding, Pennsylvania land banks have taken on smaller, more focused tasks, such as asset management in Philadelphia. There, the land bank is getting land together and creating a clearinghouse for development. In its first two years, the Philly land bank has gathered 8,000 properties and will begin acquiring more from tax sales, planning to convey more and more each year: 350 in 2015, up to 2,250 by 2019. “That’s a pretty tall order,” Kromer allowed, even though the land bank has $500,000 in funding from the city’s redevelopment authority and uses some of its staff.

A focus on blight elimination through real-estate transactions is more frequently the goal of other state land banks already established or being planned, “where it can really make a difference with these blighted properties,” he said. Westmoreland County’s land bank, for instance, has just acquired the vacant 6.7-acre Monsour Medical Center property. It and other county land banks are using their money and expertise to help small municipalities that lack resources to work on eliminating blight. Westmoreland has signed agreements with 10 of its municipalities, each of which pays the county $5,000 to discharge tax liens of properties acquired by the land bank; each of the 10 also agrees to maintain land-banked properties until conveyed to new owners.

Some land banks sell properties to developers as they are bought; others rehab the best or demolish the worst before trying to sell them. In Erie, the land bank can help houses all over the county, but the city is administering it. The Dauphin County Land Bank Authority has decided to start small, with only four houses being acquired and renovated in two years.


“The tax sale is the biggest marketplace for neglected properties,” Kromer pointed out. “Not to look at that carefully with strategic planning in mind is missing a lot of opportunities. There’s an opportunity to make some money for the public” rather than letting private developers snatch up cheap properties, do minimal work to make them rentable and then neglect them again.

In Berks County, with the city of Reading, and in Erie, auction officials have had to expand their tax-sale venues recently. Kromer has noticed Brooklyn and Miami residents among the bidders. There, authorities set the initial bid, but most properties still sell for “bargain-basement prices,” he said, while half the properties remain unsold.

“So we’ve got a big problem: Can we leverage the value of the sought-after properties to make some money” to help buy and rehab the less-desirable properties? “That gives us an opportunity to game the tax system in a good way.”

Kromer suggested two strategies land banks ought to try. One is to examine the tax-sale listings with a known, worthy developer and pull out the most sought-after properties for land banking. The other strategy is for a land bank to acquire the higher-value properties at sheriff’s sale, pay money owed to lien holders and resell those properties right away to developers.

To accomplish those goals, Kromer recommended that land banks vet potential development partners prior to property acquisition. That tactic drew concern from audience member An Lewis, adjunct faculty member in the Graduate School of Public and International Affairs (GSPIA) and executive director of the Steel Valley Council of Governments, which is trying to start a land bank with local municipalities and school districts: She warned that some developers not favored by land banks may see this as “an overreach [that] is going to end up in court.”

Kromer urged that any land-banking strategy be coupled with property maintenance code enforcement and a community-planning effort: “What are our standards for making decisions about what sort of proposals we’ll consider for properties that will be considered for land banks?”

And he noted that the term “land bank” can sometimes raise hackles among the public, who envision the land bank as a possible government land grab. He proposed calling land banks a “land aid” organizations instead.


Kendall Pelling, director of land development for the nonprofit East Liberty Development, suggested that land banks and the developers with whom they work must take “the sweet with the bitter” — the less desirable properties alongside the real moneymakers. “The auction is not the truest expression of the private market. That’s what the private developers know. If we want to preserve our assets” in each neighborhood, public agencies such as his need to research and do their own buying and selling. Developing best and worst properties together, he said, “that’s where you really take care of the blight.”

An Lewis agreed: “The sweet spot,” she said, is finding places of value in close proximity, allowing you to “stabilize a neighborhood or section of a neighborhood.”

Concluded Sabina Deitrick, GSPIA faculty member and co-director of the urban and regional analysis research program at UCSUR, who introduced Kromer: Land banks “are all different because they’re all just getting started. They’re slow to set up. They’re very politicized.”

However, she added, “before the land banks … there were a whole set of things that kept land sitting there as problem properties. We hope this helps us with fighting blight and fighting vacancy and helps us pull resources together for existing challenges.”

—Marty Levine

Filed under: Feature,Volume 47 Issue 7