Although the use of land banks has been in existence for many years in other states, it was not until after the New York real estate market collapsed in or around 2008 that the New York State Legislature enacted the 2011 New York State Land Bank Act (“Land Bank Act”).
The Land Bank Act authorizes local governments with taxing authority, and thus foreclosure powers, to create and administer not-for-profit land bank corporations, whose primary purpose is to purchase, lease, sell, demolish and/or revitalize blighted properties, otherwise known as “zombie properties,” in an effort to return these properties to a profitable and purposeful use.
There are presently fifteen land banks across New York State, with three additional land banks in the works. Suffolk County formed one of the first land banks, known as the Suffolk County Land Bank Corporation (‘SCLBC’), in 2013. The initial primary purpose of the SCLBC was to purchase brownfields properties. In 2016, however, the SCLBC announced that it is entering a pilot program designed to purchase approximately eleven zombie homes in the Brookhaven, Islip and Babylon areas. The Nassau County Land Bank Corporation advises that it will focus on purchasing some 1,956 blighted residential and zombie properties throughout Nassau County.
In October 2016, the New York State Comptroller’s Office issued a 22-page summary defining the purpose of the Land Bank Act, while also providing a candid discussion of the monetary pitfalls facing land banks. The summary questioned whether land banks will be effective in not only combating blight and providing necessary revitalization, but also in securing the funds necessary to foster their longevity.
Presently, land banks are primarily funded by subsidies and grants. As the cost of purchasing, carrying, demolishing and/or renovating blighted properties can be extraordinarily high, without tax abatements or partnerships with local and state governments, land banks are not generating sufficient profits to reinvest in other blighted properties. The consequence is that the process of redevelopment is slow moving and uncertain.
Contrary to the New York State Comptroller’s October 2016 summary, on November 1, 2016, the New York State Attorney General’s Office issued a 26-page report entitled “Revitalizing NY State, A report on New York Attorney General Eric T. Schneiderman’s Land Bank Community Revitalization Initiative” (“AG Initiative”). The AG Initiative states that the Initiative “is helping communities across New York State address vacancy and blight . . . [and] is advancing efforts to rebound from the housing and economic crisis.” Id.
The AG Initiative further reports that “[o]ver the past three years, my office has committed more than $30 million through two competitive rounds of funding to help kick-start these vital community-based organizations, enabling them to get down to the business of rebuilding communities.” Id. The first competitive rounds of funding arose from a financial settlement with large banks involved in the mortgage crisis known as the “National Mortgage Settlement.” See New York State Comptroller’s Office Report, October 2016, supra.
According to the AG Initiative, as a result of recent settlements with two more banks, an additional $20 million is expected to be available shortly for distribution to the existing land banks. Id.
For the time being, although land banks rely primarily on funds provided from settlements between the New York State Attorney General’s Office and banks, land banks remain in a tenuous financial predicament. The future success of these land banks relies heavily on their ability to increase grant availability and to find inventive ways to turn a profit more quickly.