Elizabeth Selbst – Fund Local Land Banking to Reverse Urban Sprawl

“Fund Local Land Banking to Reverse Urban Sprawl”

If the US government had $100 million remaining, it should fund a land banking program that would enable local governments to reverse inefficient land use patterns. Housing and Urban Development’s Office of Sustainable Communities would supervise a competitive grant process through which local governments could establish land banks to acquire vacant properties. By requiring a substantial cost share, portfolio managers would ensure that funds reach governments with sufficient technical and program capacity to implement projects with immediate impacts.

Shifting population patterns and dynamics of regional economic development have dramatically changed the landscape of America’s post-industrial cities. Today’s declining central city neighborhood is defined by isolation, an absence of commercial services, and the lack of strong civic institutions. 1 out of every 11 houses in Indianapolis is vacant. Detroit has lost more than half its population since 1950. At the same time, forces of counter-urbanization encourage “leapfrog” development outside the greenbelt, exacerbating the problem of urban sprawl. Foreclosure rates in the Phoenix-area housing market reached more than 40 percent in early 2011, proving that rapid exurban development is neither environmentally nor financially sustainable.

This pattern of development imposes untenable costs on local governments. While a city’s population shrinks, its outdated and oversized physical footprint remains. Maintaining infrastructure to provide municipal services to isolated neighborhoods is not feasible if a decreasing tax base provides diminishing property tax revenue. Meanwhile, opportunistic land speculators absorb available property at market bottom prices. Absentee landlords rarely invest in neighborhood revitalization and the spillover effect of abandoned blighted houses often drives down property values in adjoining neighborhoods.

The proposed project would allow city governments to establish public land banks for the purpose of acquiring tax-foreclosed and abandoned houses. In removing toxic assets from banks’ balance sheets, this consolidation of vacant properties would help private sector commercial banks lend more freely to small businesses, encouraging community-level economic development. As land prices appreciate over time, the value captured in these assets benefits municipal governments rather than land speculators. Following a period of economic recovery, city governments can either borrow against the titles of formerly abandoned houses, or sell the properties to appropriate residential and commercial developers.

Federal funding for public land banking would help cities to reduce urban sprawl by re-concentrating populations in compact community patterns. Higher intensities of development lead to efficiency gains in building sewer, road, transit, and other essential infrastructure, as well as a reduction in per capita energy consumption. If energy prices continue to rise, the environmental benefits associated with compact development would further help insulate local governments against the instability of price shocks.

Grant funding for municipal land banking represents an efficient use of the government’s final $100 million because it directs money towards cities with “shovel ready” projects for immediate impact. It primes cities for future economic development while helping them prepare to face new realities of a post-carbon economy. Federally funded land banking would help local governments leverage inefficient patterns of sprawl by creating opportunities to revitalize post-industrial cities.