Nonprofit Land Banks: A Powerful Tool for Strengthening Neighborhoods

It’s obvious to anyone driving through dozens of Memphis’s neighborhoods — Memphis has too many abandoned and vacant properties.  More than 13,000 structures and vacant lots are abandoned, in disrepair, neglected or overgrown.  In many neighborhoods the extent of vacant and abandoned property seems overwhelming; often entire blocks are empty and blighted.

Memphis is not alone in facing the problem of neighborhoods plagued by such properties.  Cities across the country are looking for ways to transform abandoned, blighted properties into productive use and to bring hope and regrowth to struggling neighborhoods. 

NONPROFIT LANDBANKS

For many cities, one of the tools that has proven effective in dealing with blighted properties is a nonprofit land bank.  Over 170 exist nationwide.  Across the country, nonprofit land banks are improving neighborhoods by developing innovative approaches to removing or rehabilitating blighted structures and restoring vacant and abandoned property.  These nonprofit land banks can strategically tailor solutions to each neighborhood’s needs.  They have broad powers to acquire, own, lease and reuse property; and properties owned by nonprofit land banks are free from property tax, making it more economical to assemble, maintain and hold properties until the time is ripe for their reuse. 

Tennessee currently has three nonprofit land banks (Oak Ridge Land Bank, Chattanooga Land Bank Authority, and Blight Authority of Memphis), with additional ones planned for several other cities and counties.  Memphis City Council established the Blight Authority of Memphis (BAM) in late 2015.  BAM has the potential to play a major role in tackling blighted properties in Memphis once properly funded and staffed.

INVESTING IN ‘BAM’

Why should Memphis invest in a nonprofit land bank like BAM, when we already have the Shelby County Land Bank?  In fact, BAM and the Shelby County Land Bank are very different. 

The Shelby County Land Bank is a department within Shelby County Government. Its role is to own, temporarily maintain and ultimately sell off property that went unsold at a tax foreclosure sale.  If a property owner fails to pay property taxes, the County can foreclose on the property and offer it for sale at a tax foreclosure sale. The minimum bid at the tax foreclosure sale is the amount of back taxes owed.  Because that amount often exceeds the value of the property, there are no bidders for over 90% of the properties offered for sale at tax foreclosure sales. When the property remains unsold, the County becomes the owner, with the Shelby County Land Bank temporarily maintaining it.

In contrast, nonprofit land banks like BAM have special legal powers that help convert abandoned, vacant property into productive use.   They can strategically acquire and own blighted property and work with neighbors, community organizations and developers to fashion creative approaches that may not be available to government for improving neighborhoods.

“A nonprofit land bank can accept the property donation and find a productive use for it… using the property for a community garden, urban forest, playground or pocket park, or even a new home or structure.”

For example, nonprofit land banks can accept donations of blighted property and then work with the neighbors to transform the property into an asset for the neighborhood.  For a variety of reasons, owners of blighted property often no longer want to own the property.  Maybe it is “heir” property that belonged to a deceased relative, and no one in the family is interested in maintaining it. the property.  Or maybe the property was damaged by fire or a fallen tree, and the owner lives out of town and has no interest in making the needed repairs.  Maybe the cost of rehabilitating or demolishing the property exceeds the property’s value.  The property may be so derelict that Memphis Code Enforcement has issued a citation for the owner to appear in Environmental Court, and the owner may ask if the property can be given to the City. However, neither the City nor the County will accept a “gift” of blighted property.  A nonprofit land bank can accept the property donation and find a productive use for it–for example, demolishing the blighted structure and using the property for a community garden, urban forest, playground or pocket park, or even a new home or structure.

Another way nonprofit land banks assist community and nonprofit groups is to help them assemble property for a specific use.  Nonprofits like Habitat for Humanity often want to build several homes clustered together, similar to Habitat for Humanity’s Bearwater Park in North Memphis. In many cities, the nonprofit land bank is instrumental in assembling the property and holding the title, free of real property taxes, until the group is ready to begin construction.  Of course, once homes are built the property is returned to the tax rolls.

In some cities, nonprofit land banks donate vacant lots to qualified owners at no cost on the condition that the new owner build a house on the lot and live in the new home for a certain number of years.  The owner has the benefit of acquiring a lot free of charge, and the neighborhood gains an improved housing stock with an owner occupant.

THE COST OF DOING NOTHING

The cost of abandoned, blighted property falls on all Memphis and Shelby County residents.  Every year the City and County spend millions of tax dollars to mow vacant and abandoned lots and to board and secure (or demolish) abandoned houses that are beyond repair.  Properties that are vacant and unmaintained become dumping sites, crime magnets, and fire hazards. They create a nuisance for the neighbors and harm the value of the surrounding neighborhood.   Using City and County tax funds to mow and de-trash these properties soaks up public funds that could improve our neighborhoods.  

A nonprofit land bank is one powerful tool for rescuing abandoned, vacant property.  Other cities across the country have used their nonprofit land banks with great success to convert blighted properties into productive use, and some level of government funding for those land banks has been critical to their success.   With modest government and philanthropic support, Memphis’s nonprofit land bank, Blight Authority of Memphis, can have a significant impact on improving life for people in many Memphis neighborhoods.  (For information on nonprofit land banks, see www.communityprogress.net)

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About Sheila Jordan Cunningham 1 Article
Attorney Sheila Jordan Cunningham is Special Advisor, Problem Properties for NPI. Since 2014 she has focused her legal practice on understanding and addressing the causes of abandoned and blighted properties, including serving as the first executive director of Blight Authority of Memphis. Ms. Cunningham served for 16 years as Senior Vice President & General Counsel for Buckeye Technologies Inc., a New York Stock Exchange company headquartered in Memphis, and was a partner in the Baker Donelson law firm. She serves on the boards of Community LIFT and Community Alliance for the Homeless and as named a 2016 Superwomen in Business by the Memphis Business Journal.

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