Michigan Land Banks: 10 Years of Struggles and Successes

In the wake of the national foreclosure crisis, Oakland County treasurer Andy Meisner says metro Detroit's real estate situation is a "problem statement" that could be solved by the unique entity known as a land bank.

"You have blight," Meisner says. "You have a real estate market that is not self-correcting at an adequate rate... It really does require a comprehensive approach–the full toolbox, if you will. And one of the tools in the toolbox is a land bank."

Ten years after Genesee County opened Michigan's first land bank, the state now has 38 community land banks authorized by the state land bank. The banks are public authorities created to hold, manage and repurpose tax-foreclosed property. They're funded by their local governments, sales of accumulated property and in some cases federal dollars. Land banks seek to avoid the blight that often sets in on foreclosed plots as a result of mismanagement by speculating buyers at auction, or disuse of properties that fail to sell at all.

"If you're selling properties for $1,000 at auction in cruddy shape, they'll get treated that way and they'll get rented out that way," says Eric Schertzing, board chair of the Ingham County Land Bank. "That's how Flint and Detroit had all of their challenges, is the accumulation of blighted properties. You want to not sell at auction the things that the private market can't deal with."

Land banks endeavor to rehabilitate and repurpose those properties in ways that can vary significantly depending on the specific needs of their communities. The banks may demolish or restore buildings, actively maintain properties, and sell or rent plots for a variety of uses including commercial developments, community gardens and side lots to existing homes. 

"The focus of the land bank is not just to sell the property," says Danielle Lewinski, vice president and director of Michigan initiatives at the Center for Community Progress, a nonprofit specializing in the revitalization of vacant property. "The focus of the land bank is to try and improve that property in a future direction for that neighborhood."

Metro area land banks: a brief history

However, much of metro Detroit's history with land banks has been troubled. The Wayne County Land Bank Corporation has been the subject of considerable controversy, particularly a 2011 nepotism scandal. The land bank suffered another major embarrassment in 2011 when the Pinnacle Race Course property in Huron Township was itself foreclosed upon three years after the bank sold it for $1.

Meanwhile, Oakland County hasn't even gotten a shot at starting a land bank in the first place. Former state land bank chair Meisner carried on a lengthy public debate with county executive L. Brooks Patterson over the issue of starting a county land bank in the late 2000s and early 2010s. The issue stalled out, with deputy county executive Robert Daddow summarizing arguments against the bank in a 2011 memo. Three years later, Daddow says the idea of a county land bank is "still troubling."

"The land banks were highly dependent upon being successful by virtue of somebody funding them, whether that be federal, state or local resources, to supplement whatever would be the income derived from the land bank itself and the transactions on their own," he says. 

But Meisner says the land bank could have been another way for the county to recover from dramatic property value losses experienced during the recession and foreclosure crisis.

"Would it have been a magic bullet that would have prevented $14 billion in the loss of our value in Oakland County?" Meisner says. "No. I don't think so. But combined with other tools … I think that we definitely could have taken a bite out of that."

Meisner, now 41, says his opposition's motivation was "a little political," rather than practical.

"I think decisions were made early about the proposal," he says. "It might have had to do with the young fellow coming in and proposing it, and maybe a little bit less with the substance of the proposal."

Success to the West

Just an hour west of metro Detroit, the Ingham County Land Bank presents a successful example of the land bank model, with a diverse approach to revitalization and wide popular support. Schertzing, who is also Ingham County's treasurer, notes that the land bank has acted as a public developer, producing and selling numerous homes and drawing new residents into the city of Lansing. But the land bank has also repurposed many vacant plots as urban gardens and farms. The bank's Garden Program currently rents out space to 49 gardens on land bank plots, and has rented to farming operations under the Lansing Urban Farm Project

For gardeners and farmers, the price is incredibly low. The Lansing Urban Farm Project rented its Urbandale Farm plot from the land bank in 2010 for $1. Schertzing says the grounding theory is "strategic redevelopment"–rejuvenating neglected areas in a way that's not focused on immediate profit.

"You don't want to just push something through to the first development opportunity you get," he says. "You want to be strategic and think about it and engage the community in the planning process and bring about the best outcome–or at least a better outcome than what just happens year by year through a tax auction."

However, Schertzing says the county is fortunate to have experienced fewer foreclosures, and fewer blighted properties, than some other Michigan communities.

"If you get too many, it's a challenge," he says. "I thank my lucky stars that I'm not trying to do this in Flint."

Progress in Pontiac

Nonetheless, a different kind of land bank program has found notable success in one metro Detroit community. Pontiac has been the recipient of federal Neighborhood Stabilization Program 2 (NSP2) funds, administered by the state land bank after Pontiac's former emergency financial manager, Michael Stampfler argued that city officials didn't have the ability to effectively administer the funds, and attempted to return them. 

One of the key projects accomplished with the funds was West Construction's redevelopment of a former Sears building as the Lafayette Place Lofts, which includes rental units, a market and a cafe. 

"We're still seeing the positive benefit a year after being open," says West Construction president and CEO Kyle Westberg. "Now there's a waiting list not only for ours, but for other properties downtown for residential property. We have a demand for urban living in downtown Pontiac that is not even close to being met because of that."

The NSP2 funds were also used in Pontiac to build 18 new homes, demolish 47 buildings and redevelop a building now known as the 10 West Lofts

"We don't really have to speculate about how a land bank would work in Oakland County because it's already worked in Oakland County for this NSP2 project," Meisner says. "And all you have to do is drive to downtown Pontiac to see the first successful development down there in 30-plus years."

While Daddow claims he hasn't followed the NSP2 developments in Pontiac, he argues that the city was the only potential justification for a countywide land bank. 

"There was absolutely no reason why Pontiac couldn't have launched their own land bank, if they saw fit to do that," he says. "In Oakland there wasn't a significant need at the time, absent Pontiac."

But Meisner readily rattles off a list of other Oakland County communities that could still benefit from a land bank, from foreclosure-stricken cities like Oak Park and Hazel Park to more thriving municipalities like Ferndale. Pontiac may be one of the county's hardest-hit communities, but Meisner says a land bank could still help alleviate the ongoing problem of foreclosure countywide. He notes that the Pontiac homes built with land bank-administered funds sold for higher than the prices around them.

"My whole passion is for boosting property values," he says. "I think the land bank is a tool that can do it, and that we've got actual examples of it doing it in Pontiac right now."

Patrick Dunn is an Ann Arbor-based freelance writer and regular contributor to Metromode and Concentrate.

http://www.davelewinski.comAll Photos by David Lewinski Photography
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