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A New Way To Fix The Foreclosure Crisis

Are land banks a new way to fix the foreclosure crisis?

New York State Assembly member Sam Hoyt and Senator David Valesky seem to think so. The two lawmakers have sponsored recent legislation in the Empire State that looks to tackle the growing problem of vacant, abandoned or tax-delinquent properties overwhelming communities such as Buffalo and Syracuse.

Based on a model that has worked successfully for Flint, Michigan since 1999, after the town shed equal numbers of manufacturing jobs and residents, New York's land bank has a stated goal of assuming control of neglected properties in order to redevelop or sell them in the public interest.

While there is no doubt that rampant blight is bad for neighboring property values and won't entice new residents and businesses, questions remain as to whether or not "the public interest" stands to gain financially from such an arrangement.

Pointedly, Buffalo Mayor Byron W. Brown objects to the creation of a land bank. According to the Buffalo News, Brown and Hoyt are longtime political enemies and the Mayor "has voiced concern in the past about who operates land banks -- cities or counties -- and who receives money from the sale of land bank property -- the land bank or the municipality."

In response, Assembly member Hoyt claims that "Brown's concerns have been addressed and that his new bill gives Buffalo complete control over its land bank if it wants one."

Local politics aside, it remains to be seen if Governor Andrew Cuomo will sign off on the legislation. While supporters of land bank formation believe he will ultimately put his signature on the bill, he has yet to publicly endorse it.

Here's how Hoyt frames the need for land banks:

"Just as one vacant building can set off a cycle of contagious blight, with declining property values leading to further abandonments, a smart redevelopment plan, implemented by a land bank that can acquire, hold and assemble parcels of land for development, green space, or public works projects can reverse this non-virtuous cycle. Their work adds value to surrounding properties and strengthens local real estate markets."
Call me a skeptic, but with so many unknowns and the nebulous management of the banks, the potential for corruption seems fairly high. And, you have to wonder whether the community receives anything in exchange, other than getting blighted properties cleaned up and back on the tax rolls.

What do you think? Could land banks be a solution to the foreclosure crisis? And, can this sort of process ever be transparent enough to appease the skeptics?


Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.
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