Land Banking: An Old Idea With A Poor Track Record

In Michigan, land banking is new. But in Missouri, it has a long and sordid history.

More than 40 years ago, Saint Louis City set up a land bank in response to the exodus of its residents, and the vacant property they left behind. When the land bank was created in 1972, the hope was that it could return vacant property back to private, productive use.

Since that time, the Saint Louis land bank has amassed more than 10,000 parcels of vacant land, making it the largest landholder in Saint Louis City. My research into the operations of the land bank found that it rejects almost one out of every two formal offers to buy vacant city property. The most frequent reason for rejection is that the property is being “held for future development.” Sadly, the future development rarely materializes.

More troubling is the outsize power that some city officials appear to have over the operations of the Saint Louis land bank. In some cases, Saint Louis aldermen determine who can and cannot buy property. I do not have to detail here what pitfalls can arise when local officials have the ultimate say over development decisions, or worse, basic property rights.

Consider the case of 2925 Union, a property in Saint Louis that received four offers from four different buyers. The Saint Louis land bank said no to all four. When the area alderman showed up at a land bank meeting and told the land bank to sell the property to another buyer, it did.

Despite the 40-year track record of failure that we have seen in Saint Louis, land banking is in vogue again. More than 30 land banks have been created in Michigan, due in part to efforts of the Center for Community Progress (CCP), a nonprofit that has offices in Flint and in Washington, D.C. The nonprofit has advocated for the creation of land banks across the country, and receives significant funding from Fannie Mae.

Dan Kildee, the president of CCP and a Michigan Congressional candidate, regularly travels throughout the U.S. arguing in favor of expansive land bank legislation. Most recently, he has been quoted in Missouri newspapers arguing for the creation of a land bank in our other major city — Kansas City.

Selling the concept of land banking in a state that is already marred by land banking failure would be a tragedy.

CCP has advocated for land bank legislation in New York, Pennsylvania, and in Georgia.

Some states have not been convinced that land banking is a cure-all for vacancy. In 2010, the Illinois Legislature rejected land bank legislation that CCP supported, due in part to concerns that the legislation would allow land banks to acquire property at any time and by virtually any means, and to take on tremendous debt. The Illinois Association of Realtors called the bill an “unchecked, unnecessary, and irresponsible grant of power.”

I have heard promises from lobbyists and advocates that the new era of land banking will be different. But, I wonder if they would continue to hold that position if they heard the stories of rejection that I have heard from neighborhood groups, and during the Saint Louis land bank’s public meetings. These are the struggles that arise long-term, when the starry-eyed advocates who promise accountability have moved on, but the land bank and its entrenched bureaucracy remain.

Given the numerous land banks already created throughout the state, I hope that land banking in Michigan is more successful than it has been in Missouri. But for the sake of Missouri, I hope that we can learn from the decades of land banking failure in our own backyard.

Audrey Spalding is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.